What is Asset Liability Management?

Asset Liability Management is a way to assess risk within an organization. 

In general, it is defined as a means of protecting assets from liabilities in an effort to get the greatest possible return on investment.  

Asset Liability Management, when done properly, can increase profits and thus lead to a rise in an organization’s stock value.

Maximizing Success By Effective Use of Assets and Liability

Assets and liabilities may seem like separate entities, but in the business world they can work well together, as long as they are harmoniously united.  

What is Asset Liability Management?

Image source: Freeimages

If there is a balance between assets and liabilities, then success within the organization can be maximized. 

There are several factors that can lead to an imbalance of assets and liabilities but the most common factors are liquidity and fluctuation of interest rates.

What Factors are Considered as part of Asset Liability Management?

  • Liquidity risk: This is an assessment of whether the organization is able to fulfill its obligations in terms of liquid cash flow. This includes all costs (current, future, scheduled, or unexpected).
  • Interest rate risk: Fluctuating interest rates impact available cash flow.
  • The organization’s financial plans for future growth.
  • Management of the organization’s resources both internally and from investors.
  • Currency risk: Money can be lost dependent upon exchange rates and varying foreign currencies.
  • Risk derived from the organization’s credit portfolio and how it affects the overall balance sheet.

AdvisoryHQ (AHQ) Disclaimer:

Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.

Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.