The Relationship between Liquidity Risk and the Financial Performance of Any ZSE-Listed Firm

There have been many rigorous, peer-reviewed studies of relationship between liquidity risk and the financial performance of listed companies for the past years (Post and Byron, 2015). In this write up management, it is defined as a process that includes the identification of potential events that may have an impact on organizational objectives, as well as the processes that drive risk assessments and response plans (Verter and Gota, 2017). A organisation's potential inability to satisfy its commitments when they come due without suffering losses that are unacceptable is an example of the kind of risk known as liquidity risk. This risk may have a negative impact not just on the profits of the organisation but also on the capital (Subhi, 2018). Therefore, it becomes the main duty of the management of an organisation to guarantee that there is adequate funding available to satisfy the future needs of suppliers and borrowers, while keeping expenses to an acceptable level. The possibility for a loss to be incurred by an institution is referred to as its liquidity risk. This risk may arise from either the organization's failure to satisfy its commitments or its inability to finance growth in assets as they become due without incurring unacceptable costs or losses. According to Andiyappillain & Prakash (2020) another definition of liquidity risk is the risk of being unable to liquidate a position in a timely manner at a price that is considered appropriate. If organisations are unable to sell their assets for a fair price, they put themselves in danger of running out of money. While frantically trying to liquidate any of the organisation's assets, the price that may be obtained remains uncertain owing to the tumultuous circumstances of the sales. It is possible that this may lead to financial losses as well as a big drop in profits. The success of an organisation may be evaluated based on how well it meets its financial objectives or how happy its employees are (Manuere, 2015)