Liquidity Risk Management

Liquidity Risk Solutions In Bangladesh

The capacity of a bank to fulfill its cash & collateral obligations without suffering intolerable losses is known as liquidity. Liquidity risk is the threat to a bank’s financial position or very existence posed by its failure to fulfill obligations, whether actual or perceived. By effectively managing their assets and liabilities, institutions can reduce their liquidity risk (ALM).

ALM and liquidity risk management cover the procedures and methods a bank employs to:


Liquidity Risk Sources

Failure To Manage Cash Flows

According to cash flow management, a corporation can identify opportunities and problems related to liquidity properly.

 Problems Getting Finance

When attempting to get finance, a late existing debt with loan covenant conditions may convert into further obstacles.

Unexpected Economic Change

The share market was at a record high in 2020, and few people anticipated that COVID would have such a significant impact.

Sudden Capital Expenses

Fixture management is crucial, especially for companies operating in capital-intensive sectors like energy or transportation.

Our Process To Measuring Liquidity Risk

Financial Ratio Analysis

Financial Ratio Analysis

Financial ratio analysis, comprehension of these ratios' meanings, and optimum course of action implementation are all important for good liquidity. Financial ratios give an organization up-to-date indications of liquidity risk.
Planning For Cash Flow

Planning For Cash Flow

Businesses should now more than ever review their operational plan and profitability projection during any uncertain period. It's critical that management has clear visibility into prospective opportunities and issues related to liquidity risk management.

Control Of Capital Structure

Considering that loan has a lower capital cost than stock and is tax deductible for businesses, it is typically the least expensive type of finance. A company must, nonetheless, carefully manage and keep an eye on this ratio for liquidity risk management.
Why choose our company

How We Managing Liquidity Risk?

It’s time to focus on management as we proceed to examine the fundamentals of assessing and controlling liquidity risk. By doing thoughtful financial planning and analysis, frequently projecting cash flow, keeping an eye on and maximizing net working capital, and managing current credit facilities, liquidity risk can be reduced.

Because lack of liquidity has  rarely been a problem, many firms, especially those with strong balance sheets and fast growth, rigorously anticipate their loss and profit.

Financial experts must have a thorough understanding of how changes in business conditions impact financing and net requirements for working capital.

The ability to handle both short-term and long-term demands, such as building cash reserves for upcoming net working capital and capital spending investments.

Importance Of Measurement And Management Of Liquidity Risk

Insolvency risk will soar if corporate executives don’t fully comprehend the sources of liquidity risk as well as the fundamentals of monitoring and controlling liquidity risk. Extraordinary difficulties of today have clearly highlighted this. Any company with liquidity risk issues should think about hiring an objective, seasoned consultant to do a complete examination of the liquidity risk before things get worse. An expert can offer assistance in getting you back on track as well as a strategy for maintaining it.

Importance Of Measurement And Management Of Liquidity Risk

You ask, we answer

Based on prior research, we will evaluate how sensitive banks’ liquidity positions are to idiosyncratic shocks. The fictitious idiosyncratic shock can manifest as, for instance, deposit withdrawals recorded in the past for banks, liquidity losses associated with rating downgrades, or the removal of promised liquidity facilities.

The findings will guide the 2019 SREP evaluation of banks’ risks. The exercise will also give regulators the chance to evaluate the reliability of the risk governance frameworks used by banks, such as their capacity to produce practical outcomes that are timely and correct. Supervisors will speak with banks about their specific outcomes.

The 2019 liquidity stress test will be carried out by a centralized team led by ECB Banking Supervision, in collaboration with supervisors from national competent authorities.

The anticipated cash flows over the next six months will be disclosed by banks. Data regarding their collateral position will also be reported. The ability for banks to use current reporting to abide by the aforementioned information requests. The Single Supervisory Mechanism (SSM) liquidity pattern, which is utilized by supervisors throughout the SSM for the high-frequency monitoring of banks’ liquidity positions, serves as the foundation for the template for the scenario analysis of liquidity risk. Every year, over the period of five consecutive days, all important institutions are asked to submit their completed SSM liquidity template.

Contact Us Right Away If You Have A Liquid Risk Management Issue.