MARKET LIQUIDITY AND ASSET LIABILITY RISK MANAGEMENT

INTRODUCTION
Financial institutions operate in an environment of constant uncertainty, where market fluctuations, liquidity pressures, and mismatches between assets and liabilities can significantly impact profitability and stability. Understanding and managing these risks is essential to protect organizational value, meet regulatory requirements, and make informed strategic decisions.

This two-day training course is designed to provide participants with practical knowledge and tools to manage market, liquidity, and asset-liability risks effectively. Using real-world examples, participants will learn how to measure, monitor, and mitigate these risks, while ensuring alignment with organizational objectives and regulatory standards.

The training emphasizes actionable strategies, risk governance, and the application of risk management frameworks to support sound financial decision-making.

COURSE OBJECTIVES

By the end of this training, participants will be able to:

• Understand the types of financial risks faced by organizations, including market, liquidity, and asset-liability risks
• Apply frameworks for identifying, measuring, and managing financial risks
• Assess the impact of interest rates, foreign exchange, and market volatility on assets and liabilities
• Develop strategies to manage liquidity and ensure financial stability
• Integrate risk management into strategic and operational decision-making
• Strengthen governance, reporting, and compliance related to financial risks

• Use practical tools for scenario analysis, stress testing, and risk monitoring

   

COURSE OUTLINE

Module 1: Introduction to Financial Risk Management

• Overview of financial risk management
• Key risk concepts and terminology
• The relationship between risk, return, and value
• Regulatory environment and standards

Module 2: Understanding Market Risk

• Types of market risk: interest rate, currency, equity, and commodity risks
• Sources of market volatility
• Measuring market risk using Value at Risk (VaR) and other tools
• Mitigation strategies and hedging instruments

Module 3: Liquidity Risk Management

• Definition and sources of liquidity risk
• Impact of liquidity stress on financial institutions
• Tools and techniques for liquidity risk measurement
• Contingency funding and liquidity planning

Module 4: Asset and Liability Management (ALM) Fundamentals

• Understanding the ALM function
• Interest rate risk in the banking book
• Balance sheet management and gap analysis
• Matching assets and liabilities to optimize risk and return

Module 5: Risk Governance and Policy Frameworks

• Role of the board, risk committees, and management
• Designing and implementing risk policies
• Reporting, monitoring, and accountability
• Integrating risk management into organizational strategy

Module 6: Advanced Asset-Liability Risk Analysis

• Scenario analysis and stress testing
• Duration and convexity measures
• Evaluating funding and liquidity gaps

• Using ALM tools for decision-making

   

Module 7: Interest Rate Risk Management

• Sources and impact of interest rate changes
• Hedging techniques for interest rate risk
• Measuring sensitivity and exposure
• Aligning interest rate strategy with business objectives

Module 8: Managing Foreign Exchange and Currency Risk

• Understanding currency exposures
• FX risk measurement techniques
• Hedging strategies and instruments
• Case studies in managing FX risk

Module 9: Integrating Market, Liquidity, and ALM Risk

• Coordinating risk management across areas
• Portfolio-level risk assessment
• Stress testing for combined risks

• Early warning indicators and proactive management

   

Module 10: Practical Tools, Reporting, and Decision-Making

• Risk dashboards and reporting frameworks
• Decision-making under uncertainty
• Aligning risk appetite with strategic goals
• Building a culture of risk awareness