Peculiarities of working capital management in conditions of an unstable economy

Working capital is a crucial indicator of financial health, essential to business operation and expansion. This article examines how to handle working capital in the face of harsh circumstances, including war, inflation, currency instability, and shifting tax policies. These circumstances lead to complicated problems: conflict puts tangible assets in danger, messes up supply networks, and necessitates the reallocation of financial resources, which affects output and liquidity. Businesses must modify pricing, inventory levels, and supply contracts to maintain profitability because of inflation’s increased costs for labor, transportation, and necessary materials. Currency swings also pose significant risks, particularly for businesses that depend on imported goods or engage in international commerce. Agile financial solutions are necessary to limit exchange rate losses since rapid exchange rate swings can result in unforeseen expenses, especially for businesses without hedging systems. Many businesses must decide between flexible but riskier arrangements that expose them to unfavourable currency moves and fixed-rate contracts that offer stability. Furthermore, changes in tax laws may put pressure on working capital allocation and financial planning, necessitating a review of financial strategies and company models. This research emphasizes how crucial it is to manage working capital in uncertain situations with a flexible and resilient strategy. Businesses may need to use instruments like forward contracts for currency stabilization, “just-in-time” inventory management to reduce inflation-driven expenses, and flexible credit lines to preserve liquidity to survive such volatility. Businesses may better manage their economic uncertainty and safeguard their financial base and competitive position by being aware of these adaptive measures. The research provides executives with valuable insights on developing financial resilience to ensure market presence and operational continuity despite significant economic upheavals. Keywords: working capital, management of working capital, uncertainty, inflation, currency fluctuations, competitiveness, financial stability.