Supply Chain Disruptions and Corporate Liquidity: Lessons from the COVID-19 Crisis, a Review of Cash Preservation, Supplier Continuity, and Emergency Financing

Abstract

The COVID-19 crisis of 2020 combined a supply shock, as factory closures in China halted the flow of intermediate goods, with a demand shock, as lockdowns spread across the world. For many firms these disruptions turned into a liquidity crisis within weeks, as revenues fell faster than costs could be cut and payment relationships along supply chains came under strain. This paper reviews how firms responded, organised around three pillars of corporate liquidity management: cash preservation, supplier continuity, and emergency financing. Firms that entered the crisis with larger cash holdings, less short-term debt, and committed credit lines were markedly more resilient. Access to emergency funding through credit line drawdowns and bond issuance was concentrated among larger and higher-rated firms, while smaller firms depended heavily on government programmes that reached them unevenly. Supplier continuity depended on visibility beyond first-tier suppliers and on buyers' willingness to protect the working capital of weaker suppliers. Process discipline, data visibility, and payment controls shaped how well firms could use the liquidity they had. The paper proposes an integrated framework that links pre-crisis preparation, in-crisis actions, and their trade-offs across the three pillars, and identifies implications for managers and policymakers together with directions for future research.