Jasz
VIP Contributor
Liquidity risk management procedures are the set of activities and processes used to reduce liquidity risk. Liquidity risk management is a combination of processes, policies, procedures and controls designed to minimize the loss from poor liquidity conditions. The aim of liquidity risk management is to ensure that the firm has sufficient cash or liquid assets available at all times to meet its liabilities.
Liquidity risk can be mitigated by:
Identifying and monitoring potential sources of liquidity risks
Using internal and external financial information to monitor liquidity requirements
Allocating liquidity risk capital across different trading entities using an appropriate mix of debt and equity instruments.
The procedures must ensure that the risks associated with the liquidity risk are managed effectively and consistently across all operations.
The procedures must be regularly reviewed and updated in line with changes to the business environment.
The procedures must be communicated clearly, both internally and externally, to ensure that all staff are aware of their responsibilities and accountabilities.
Liquidity risk can be mitigated by:
Identifying and monitoring potential sources of liquidity risks
Using internal and external financial information to monitor liquidity requirements
Allocating liquidity risk capital across different trading entities using an appropriate mix of debt and equity instruments.
The procedures must ensure that the risks associated with the liquidity risk are managed effectively and consistently across all operations.
The procedures must be regularly reviewed and updated in line with changes to the business environment.
The procedures must be communicated clearly, both internally and externally, to ensure that all staff are aware of their responsibilities and accountabilities.