Liquidity Risk Framework™
Ensure the organisation can meet obligations under normal and stressed conditions.
Liquidity risk is the risk of being unable to meet obligations as they fall due. This framework protects the survival horizon through buffers, monitoring and a contingency funding plan.
A profitable business can still fail if it runs out of cash; without survival-horizon monitoring and a contingency plan, a liquidity shock becomes existential.
Ensure the organisation can meet obligations under normal and stressed conditions.
- CFOs
- Treasurers
- Financial institutions
- ALCO members
- Liquidity position & runway
- Survival horizon
- Buffer policy
- Contingency funding plan
- Liquidity stress testing
- Early-warning indicators
- Treasury/CFO own; ALCO/Risk Committee oversee; the board approves the buffer policy and survival-horizon targets.
Fragile
Maturity level 1 of the shared Outliers risk spine — Fragile.
Functional
Maturity level 2 of the shared Outliers risk spine — Functional.
Disciplined
Maturity level 3 of the shared Outliers risk spine — Disciplined.
Strategic
Maturity level 4 of the shared Outliers risk spine — Strategic.
Resilient
Maturity level 5 of the shared Outliers risk spine — Resilient.
- Establish cash and runway monitoring
- Set the survival-horizon target and buffer
- Build the contingency funding plan
- Stress for shocks (incl. FX)
- Define early-warning triggers
- Liquidity policy
- 13-week cash model
- Contingency funding plan
- Liquidity stress pack
- Liquidity risk policy
- Buffer policy
- Contingency funding plan
- Days cash on hand
- Liquidity coverage vs target
- Funding concentration
- Buffer utilisation
- How many days of liquidity do we have under stress?
- What triggers our contingency funding plan?
- How concentrated are our funding sources?
- Is our buffer policy still appropriate?
Related across the Risk Centre
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Senior risk advisory across the Outliers framework set.
Across the ecosystem
Knowledge graph · 3 relations