Liquidity Stress Test Checklist
Ensuring access to cash is a core responsibility for CFOs and treasurers. In uncertain environments, that mandate requires building a resilient cash strategy that can withstand market stress, shocks, and crises to ensure obligations are met.
This checklist is intended to help CFOs and treasurers evaluate exposures across banks, funds, and cash equivalents, and to surface risks that may only become visible during periods of heightened market stress. It is a high-level framework designed to support internal review and discussion, not a substitute for institution-specific analysis, professional advice, or formal risk assessment.
Key Takeaways:
Understand the risk profile of the underlying asset:
Liquidity, price stability, and time to conversion determine the likelihood of an asset being converted to cash in a crisis scenario.
Assess the institutions and counterparties involved
The institutions and intermediaries involved influence how quickly and reliably cash can be accessed. For example, some assets rely on functioning intermediaries or short-term funding markets to remain liquid.
Examine the structure of each cash instrument
Ownership structure, commingling, balance sheet exposure, and segregation determine whether cash remains accessible under stress.
Test how redemptions actually work under pressure
Liquidity in normal conditions may not translate into usable cash when redemption demand accelerates.
Evaluate operational reliability
When obligations must be met, the institution you operate through must remain functional, responsive, and reliable at all hours.
The Checklist:
1. Underlying Asset Risk and Liquidity
The foundation of any cash instrument is the behavior of the underlying asset during stress. Even assets considered safe can experience dislocations if liquidity evaporates or forced selling accelerates.
☐ Risk of loss when liquidating or redeeming
☐ Asset behavior in times of stress
☐ Market depth during stress, not just normal conditions
☐ Liquidity timeframes
☐ Dependence on intermediaries or funding markets for liquidity
In a liquidity crisis and sell-off scenario, how quickly, predictably, and independently does an asset convert into cash?
2. Ownership & Legal Structure
In a stress scenario, access depends on custody, segregation, ownership, and how assets are treated if a custodian, manager, or bank fails.
☐ Ownership of securities (versus a shareholder of a fund or unsecured creditor)
☐ Clear chain of custody at a reputable custodian bank
☐ Comfort with the insolvency scenario in governing documents
☐ Comfort with the financial institution’s business continuity policy
If assets are not directly owned and segregated, liquidity may be subject to insolvency proceedings rather than operational needs.
3. Fund Commingling and Redemptions
Funds provide access to a diversified portfolio of assets by pooling shareholder funds. This structure means liquidity can be affected by the redemption behavior of other investors.
☐ Underlying assets & the counterparty risks associated are within appetite
☐ Fund size and investor concentration reduce the risk of accelerated redemptions
☐ Redemption fees that could significantly affect cash flows
☐ Daily and weekly asset thresholds (DLA, WLA)
Liquidity in commingled funds depends not only on asset quality, but on the redemption behavior of other investors that also need to meet obligations in a crisis.
4. Balance Sheet Exposure
Financial institutions and intermediaries operate with leverage, liquidity constraints, and regulatory controls that can restrict client access to cash during stress.
☐ Deposit insurance or institutional support may not guarantee immediate access
☐ Institution’s size, funding profile, and systemic importance are well understood
☐ Dependency on discretionary actions by the institution or counterparty for fund access
Banks may be vulnerable to rapid outflows during stress, which can restrict access to deposits regardless of insurance levels.
5. Redemption and Conversion Mechanics
In a crisis scenario, liquidating a position is only half the battle. To be able to make payments and meet obligations, cash must be in an operating account, and thus is reliant on the financial institution’s ability to wire out funds in a timely manner.
☐ There are no manual sell orders or discretionary approvals required
☐ Portfolios include a significant amount of liquid, short-term assets
☐ Sufficient cash is held in an operating account to meet short-term obligations
☐ Proceeds from liquidation are accessible through an operating account
Liquidation does not equal access if funds cannot be converted into usable cash quickly.
6. Operational Continuity
Market events and liquidity needs do not follow banking hours, and operational continuity depends on systems and processes that operate around the clock.
☐ Access to funds is available 24/7, including weekends and holidays
☐ Infrastructure is designed for continuous operation, not batch processing
☐ Operational performance during past market stress events is understood
Operational continuity depends on systems that function beyond standard banking schedules.
Bottom Line
The true measure of a cash strategy is not how it performs in calm markets, but how reliably it delivers access when conditions deteriorate. Stress testing a cash strategy is an ongoing discipline that becomes especially important as teams prioritize liquidity and operational resilience. Market conditions change, balance sheets evolve, and assumptions that hold in calm periods can break down quickly under stress.
Uncertainty remains a defining feature of today’s environment. In moments of disruption, the most important responsibility for a treasurer is ensuring continued access to cash to meet obligations as they come due.
Crisis Proofing Cash with Jiko
Jiko offers a uniquely safe and liquid solution for CFOs and treasury teams to store and move cash that offers resiliency through even the most significant market turmoil and crises.
Jiko is a bank and broker-dealer that provides programmatic and direct access to US Treasury bills (T-bills), held in the client's name, and automatically reinvested at maturity. Funds held at Jiko remain operational as T-bills are instantly liquidated to fulfill withdrawals and payments initiated by the client, even outside traditional trading hours, to help ensure client cash remains accessible without interruption. The result is a fully operational account that is free from balance sheet risk and invested in government-backed T-bills, earning the “risk-free” rate.
Underlying Asset Risk and Liquidity
Jiko provides clients with direct ownership of U.S. Treasury bills. T-bills are short-term, government-backed instruments with one of the deepest and most reliable liquidity profiles in global markets. Their behavior during stress is well proven, as investors often flock to T-bills when market stress emerges.
Ownership and Legal Structure
Treasury bills are held directly by the client in segregated client accounts under the Securities Exchange Act, with custody at a major custodian bank.
By combining direct ownership with clear custody and regulatory protections, Jiko is designed to keep client assets isolated, transparent, and accessible even during periods of market or institutional stress.
Fund Commingling and Redemptions
Jiko does not rely on commingled fund structures. Liquidity is not dependent on the redemption behavior of other investors, fund gates, or liquidity thresholds. Each client’s access to cash is independent of other participants, reducing correlation risk during periods of market pressure.
Balance Sheet Exposure
Jiko Bank is completely de-levered to keep client funds free from traditional bank balance sheet risk. This reduces exposure to leverage, capital constraints, and discretionary actions that can restrict access during periods of rapid outflows or system-wide stress.
Redemption and Conversion Mechanics
Liquidity at Jiko does not rely on manual sell orders, approvals, or delayed settlement cycles. Funds remain operational and accessible through integrated payment capabilities, ensuring that converting assets into usable cash does not become a bottleneck when obligations must be met.
Operational Continuity
Jiko is designed to support continuous access to cash and settlement through JikoNet, even when traditional banking infrastructure is constrained. JikoNet enables 24/7 transaction settlement between participants without relying on external intermediaries, wire rooms, or bank operating hours.
When a transaction is initiated, Jiko facilitates an on-network transfer by liquidating the sender’s Treasury bills, moving the proceeds as cash to the recipient’s Pocket, and reinvesting those funds in Treasury bills on the recipient’s behalf. This process occurs in real time and does not depend on batch processing, manual approvals, or third-party settlement windows.
In a crisis scenario, delays often arise not from asset liquidity but from operational bottlenecks such as closed wire desks, staffing shortages, or internal prioritization at operating banks. By enabling settlement within Jiko’s network, JikoNet enhances settlement reliability by operating independently of traditional points of failure and helps ensure that obligations can still be met when traditional channels are unavailable.
Access to Cash When It Matters Most
Ensuring access to cash under stress is not just about what assets are held, but about whether those assets can be converted into payments when it matters most. The true test of a cash strategy is whether it delivers certainty of access, settlement, and continuity when markets and institutions are under pressure.
Jiko is purpose-built to serve as a resilient reserve for that critical portion of cash. By combining direct investment in U.S. Treasury bills with a de-levered structure and always on settlement through JikoNet, Jiko enables treasurers to keep cash operable and ensure obligations can be met during significant market and banking stress.
To discuss how Jiko can support a resilient cash strategy, connect with the team here.