Liquidity management

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The economic downturn is affecting how financial institutions manage liquidity in a number of ways. It has particularly affected the liquidity of financial instrument portfolios, which now need to be thoroughly reappraised.

If this is your situation

• Liquidity management procedures are inadequate, and restrictions are obsolete and prevent business from going forward
• The existing level of control over liquidity and cash flows is no longer sufficient
• Additional volume of liquid reserves needs to be attracted to close the liquidity gap
• Liquidity contingency plans are not realistic in the current market conditions
• Fair value and maturity of assets as well as conditional liabilities that could materialise in the current environment need to be identifiedQuick decision making often fails to follow the even faster economic environment
• The end-of-the-day report, uploaded from the IT system, is always late
• ALM and risk management teams fail to collaborate

Our Financial Services Advisory Group can help financial institutions get a more realistic evaluation of their liquidity position and better understand the condition of their financial instruments portfolio. We can review financial institutions’ IT systems and operational structures as well as the policies and procedures that govern the asset and liability management system in order to adapt it to the current market conditions.

How we can help you

• Develop and improve liquidity contingency plans under the crisis conditions
• Analyse actual liquidity and evaluate liquidity risk
• Assess the relevance and efficiency of models used to analyse assets and liabilities
• Design scenarios and stress tests to analyse the efficiency of policies and models for liquidity contingency procedures under the crisis conditions
• Develop policies and procedures for liquidity risk management
• Develop reporting systems within the asset and liability management framework, including a system for monitoring liquidity risk
• Analyse actual liquidity and the system of limits to make recommendations for necessary changes
• Develop a methodology for evaluating the deposit base and the potential growth of accounts receivable due to realised contingencies
• Test the current IT system architecture and evaluate its efficiency at maintaining procedures for asset and liability management. We can also help with selecting IT system providers

Benefits to a client

• Implementation of the standard industry practices used in Western markets
• Consistent asset and liability management standards throughout the company
• Increased transparency in identifying liquidity risk for the whole company.
• Formalised policies and procedures
• Enhanced effectiveness and accuracy in evaluating liquidity risk, communicating this to company management as well as risk testing and modelling
• Automation of report preparation and the collection of analytical data for asset and liability management
• Accurate segregation of duties and responsibilities within the liquidity management unit and control over liquidity monitoring performed by the company’s management
• Independent analysis of the current assets and liabilities portfolio