What is Liquidity Forecasting & Stress Testing?
A need to manage liquidity risks effectively is critical, making funds management, forecasting cash flows, and contingency funding plans, as well as building a sound liquidity framework, more important than ever. Depositories need to identify plausible stress events that could hinder the institution’s ability to meet short and long-term obligations. Your institution must understand the impact that an event negatively affecting your liquidity, earnings, or capital base, whether external or institution-specific, has on the balance sheet.
Validation Opportunities with ALM First
ALM First performs liquidity analyses as an ancillary service to help your institution predict, and prepare for, changes in the liquidity position over the coming months. Our team of experts analyzes how projected growth, purchases, and sales affect liquidity. We assist in monitoring primary and secondary sources and uses, identifying alternative liquidity sources, measuring forecasted ratios, and meeting regulatory requirements.
Key components include:
- Evaluation of current liquidity measurement and management processes
- Review of current liquidity risk and contingency planning processes
- Assessment of liquidity and funds management policies
Our complex model captures optionality to accurately project cash flows of all loans and investments.
Unbiased Strategic Consulting
We focus on strategic positioning to improve institutional performance and profitability while minimizing risk.
We provide assistance with basic liquidity reporting and stress testing, to adjusting internal policies and developing liquidity framework.
The Importance of Liquidity Forecasting & Stress Testing
ALM First works closely with your institution to ensure operational and regulatory needs are met. With ALM First, your institution can:
- Recognize the key components of a successful analysis
- Identify plausible stress events that could hinder the institution’s ability to meet short and long-term obligations
- Understand the impact that an event negatively affecting its liquidity, earnings, or capital base, whether external or institution-specific, has on its balance sheet
- Maintain a sound Contingency Funding Plan (CFP)