Liquidity risk management
As a consequence of the credit crunch and recent FSA requirements, managing liquidity risk has become a higher priority for banks and financial institutions.
Sound liquidity risk management is about workflow. The ability to meet cashflow payments lies not in exotic modelling but in operational processes.
We review your risk processes and develop tools and systems that will help you:
- monitor and protect your solvency
- ensure your organisation is risk informed
- demonstrate regulatory compliance with BIS and domestic reporting requirements.
Managing liquidity risk requires a company-wide approach and this places a high demand on the right processes and procedures. A system used to mitigate liquidity risk should be:
- accurate and communicative
- regular and timely, allowing you to judge market changes and your organisation’s liquidity profile
- comprehensive and customised to your organisation
- realistic with scenarios that identify risk in actual situations.
We advise our clients on how to quantify, examine, communicate, control and mitigate their liquidity risk and we design systems to help them better manage these requirements.
Our risk management services
We provide ‘health check’ reviews of your organisation and benchmark your liquidity risk management processes alongside your peers.
In order to meet BIS regulatory requirements, we implement tools that include:
- Forward Liquidity Exposure (FLE)
Calculating this profile allows banks to answer the question ‘will we be solvent in the future?’, as well as set limits and identify weak points.
- Creating risk measures
These include Cashflow-at-Risk (CFaR), Expected Liquidity-at-Risk (ELaR) and Value Liquidity-at-Risk (VLaR).
- Counter Balancing Capacity (CBC)
We build and integrate solutions that can model and simulate your bank’s funding mechanism and enable you to quantify the likelihood of insolvency for a given funding requirement.
Liquidity risk
What are the recent requirements from the FSA?
Visit the FSA website to read their consultation papers:
CP 08/22, CP 09/13 and CP 09/14
on strengthening liquidity standards
To start managing your liquidity risk
contact Steve White on
T: +44 (0)20 7489 2900
E: liquidityrisk@riskcare.com