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The Role of Cash in Emergency and Crisis Situations

Categories : Cash and Crises, Cash is a contingency and fall-back solution
July 21, 2023
Tags : Crisis, disaster recovery, Germany
Cash is the only payment instrument that is largely independent of technical infrastructure. It is therefore essential, especially in crisis and emergency situations, to ensure that the cash cycle continues to operate, as electronic means of payment are unavailable or only available to a limited extent.
Esther Kern

Research Fellow at the Brandenburg Institute for Society and Security (BIGS)

This post is also available in: Spanish

A new paper [in German] by the Brandenburg Institute for Society and Security (BIGS) explores the role of cash in emergencies and crises from a socio-economic perspective. BIGS is an independent, non-partisan non-profit institute in Potsdam with the mission of building bridges between theory and practice to improve research in civil security through a multi- and interdisciplinary approach.

The functions of cash are presented before its role in emergency and crisis situations is discussed. The most important function of cash in emergencies and crises is that it can be used even when there are disruptions and failures in the IT infrastructure or the power supply. Therefore, electronic payments are temporarily unavailable. In this context, the authors emphasize the importance of crisis communication is emphasized. After all, crises always pose a communication challenge, and crisis communication can influence the course of these situations negatively and positively. It can also be decisive in ensuring a constant cash supply in emergencies and crises.

In the second part of the paper, the authors present the risk assessment results of cash management companies in two scenarios – pandemic and power outage. The results are based on qualitative, semi-structured interviews with actors of these companies. The risk assessment aims to outline possible problem areas of systemic importance and identify risks that need to be addressed to increase the resilience of the cash cycle.

A third part dives into the question of possible price effects in the cases of crises for the regular consumer. The analysis showed that crises might have an impact on the cash market. Moreover, price effects might occur due to changes in demand and/or supply (e.g. delivery problems, infrastructure failures, etc.). Depending on the nature of the crisis, there will be changes in the demand for cash, e.g. due to fewer possibilities to pay by card. A return to price stability is in the hands of the European Central Bank, with the overriding goal of a long-term inflation rate close to 2%.

Even though the report focuses on the German cash cycle and the research data collection took place within a German context, the findings might also apply to other countries.

This publication was produced during the research project BASIC (Resilience of the cash supply – security concepts for emergencies and crises). The Federal Ministry of Education and Research in Germany provided the funding within the framework of the program “Research for Civil Security” and during the call “Civil Security – Socio-Economic and Socio-Structural Infrastructures” from January 2020 to March 2023.

This post is also available in: Spanish