LIQUIDITY RISK MANAGEMENT
From Regulatory Liquidity Metrics to Strategic Liquidity Management, Funding and Bank Resilience
Liquidity is not merely a bank’s ability to meet its obligations. It is one of the fundamental prerequisites for stability, confidence and a sustainable business model.
A bank may maintain satisfactory capital adequacy and profitability while remaining exposed to significant liquidity risks. Changes in depositor behaviour, funding concentrations, market disruptions, rising funding costs and unexpected cash outflows can substantially alter its liquidity position within a short period.
Liquidity risk management therefore requires much more than monitoring regulatory indicators.
It involves understanding the balance sheet structure, cash flows, funding stability, customer behaviour, risk interdependencies and the bank’s ability to respond to adverse conditions.
RISKA provides specialized advisory and training services to banks seeking to develop and enhance their liquidity risk management frameworks, including Asset and Liability Management (ALM), ILAAP, liquidity stress testing, funding planning and liquidity management under stressed conditions.
HOW CAN WE SUPPORT YOUR BANK?
Development and Enhancement of Liquidity Risk Management Frameworks
An effective liquidity risk management framework should be aligned with the bank’s business model, risk profile, funding structure and applicable regulatory requirements.
RISKA provides support in:
Developing and reviewing liquidity risk management policies and procedures.
Defining methodologies for identifying, measuring, monitoring and controlling liquidity risks.
Establishing appropriate limits and early warning indicators.
Defining the responsibilities of the Management Board, Asset and Liability Committee (ALCO), Treasury, Risk Management and other relevant functions.
Enhancing escalation procedures and management decision-making processes.
Integrating liquidity risk management into the bank’s overall risk management framework.
The objective is to establish a framework that enables the bank to understand its liquidity risks, identify changes in a timely manner and make appropriate decisions.
ILAAP – INTERNAL LIQUIDITY ADEQUACY ASSESSMENT PROCESS
The Internal Liquidity Adequacy Assessment Process (ILAAP) should enable a bank to assess its ability to maintain adequate liquidity under both normal and stressed conditions.
ILAAP should not be viewed merely as a document or a periodic regulatory exercise.
It should connect the bank’s business model, strategy, risk profile, internal assessments, stress testing, funding planning and management decision-making.
RISKA provides support in:
Developing and enhancing ILAAP frameworks.
Identifying material liquidity risks.
Defining methodologies for internal liquidity adequacy assessments.
Linking ILAAP to the Risk Appetite Framework and limit system.
Integrating liquidity stress testing and funding planning.
Improving documentation, reporting and management use of assessment results.
Assessing existing frameworks and identifying opportunities for improvement.
A robust ILAAP should help answer a fundamental question: How capable is the bank of maintaining adequate liquidity under conditions that deviate from its expected business scenario?
LIQUIDITY STRESS TESTING
Liquidity risks can materialize rapidly, and their consequences may be significant even when initial liquidity indicators appear satisfactory.
Stress testing is therefore one of the key instruments for assessing a bank’s resilience.
RISKA provides support in:
Developing liquidity stress testing methodologies.
Defining institution-specific, market-wide and combined stress scenarios.
Identifying relevant risk factors and stress assumptions.
Analysing potential deposit outflows and other funding pressures.
Assessing the availability of liquidity buffers.
Analysing time horizons and the dynamics of liquidity needs.
Linking stress testing results to limits, ILAAP and contingency planning.
Particular emphasis is placed on interpreting stress testing results and using them to support management decisions.
LIQUIDITY MANAGEMENT UNDER STRESSED CONDITIONS
Even a well-managed bank may face unexpected liquidity pressures.
A Liquidity Contingency Plan (LCP) should enable the timely identification of emerging problems, clearly defined responsibilities and the activation of appropriate measures.
RISKA provides support in:
Developing and enhancing LCP.
Defining indicators and criteria for plan activation.
Establishing responsibilities and escalation procedures.
Identifying potential emergency funding sources.
Defining contingency measures and priorities.
Linking the LCP to liquidity stress testing results.
Aligning relevant LCP elements with the bank’s Recovery Plan.
A liquidity crisis is not the time to begin determining who makes decisions, what information is required and which measures the bank can take.
LIQUIDITY MANAGEMENT REPORTING
Effective liquidity reporting should provide a clear understanding of the current liquidity position, trends, concentrations, potential vulnerabilities and required actions.
RISKA provides support in:
Developing reports for the Management Board, ALCO and other relevant users.
Defining Key Risk Indicators (KRIs) for liquidity risk.
Structuring dashboards and early warning indicators.
Connecting regulatory and internal liquidity metrics.
Developing analytical commentary and explanations of deviations.
Enhancing data quality, controls and responsibilities throughout the reporting process.
Particular attention is given to data quality and clearly defined responsibilities for preparing, reviewing and using information.
WHY DOES EFFECTIVE LIQUIDITY RISK MANAGEMENT MATTER?
An effective liquidity risk management framework enables a bank to:
Identify changes in its liquidity position at an early stage.
Better understand funding stability and concentration.
Connect regulatory liquidity metrics with internal risk assessments.
Enhance ALM and balance sheet planning.
Strengthen the quality of ILAAP and liquidity stress testing.
Develop effective early warning mechanisms.
Improve preparedness for unexpected liquidity pressures.
Support better management and strategic decisions.
Strengthen the resilience of its business model.
Effective liquidity management goes beyond meeting minimum regulatory requirements. It means understanding the bank’s ability to fund its operations and respond to changes in its operating environment.
NEW RISKA PROFESSIONAL TRAINING PROGRAM: LIQUIDITY RISK MANAGEMENT
First Edition in 2026
In 2026, RISKA is introducing its first professional training program dedicated to liquidity risk management in banks.
The program is designed to connect regulatory expectations, methodological approaches and practical challenges of liquidity management in modern banking.
Particular emphasis is placed on understanding liquidity management as a cross-functional responsibility, involving ALM, Treasury, Risk Management, Finance, business units and governing bodies.
Key Program Topics
The proposed thematic areas include:
Regulatory framework and fundamental principles of liquidity risk management.
Liquidity risk governance, roles and responsibilities.
ALM and the management of asset and liability maturity structures.
LCR, NSFR and internal liquidity indicators.
Deposit stability, behavioural assumptions and funding concentrations.
ILAAP and internal liquidity adequacy assessment.
Liquidity stress testing and scenario analysis.
Funding planning and liquidity buffer management.
Contingency Funding Plans and their relationship with Recovery Plans.
Liquidity reporting, early warning indicators and management decision-making.
Who Is the Program Designed For?
The program is intended for professionals involved in liquidity management, funding, balance sheet management and related risks, particularly:
Risk management specialists and managers.
ALM and Treasury professionals.
Finance and business planning teams.
Employees involved in ILAAP and stress testing.
Regulatory and management reporting specialists.
Internal audit and other control functions.
ALCO members and other managers involved in liquidity management.
What Does the Program Offer Participants and Banks?
The program provides participants with an opportunity to develop a more comprehensive understanding of liquidity risks, regulatory metrics, cross-functional dependencies and the practical application of liquidity risk management methodologies.
For banks, investing in professional development contributes to a shared understanding of risks, clearer responsibilities, higher-quality analyses and stronger integration of liquidity management into business decision-making.
Information About the First Edition
The first edition of the RISKA Liquidity Risk Management program is planned for 2026. Program on local language.
Further details regarding the date, delivery format and registration process in the Agenda
To express your interest or request additional information, please contact: contact@riska.ba
RISKA PROFESSIONAL TRAINING AND IN-HOUSE PROGRAMS
Training Tailored to Your Institution’s Needs
In addition to the open professional training program, RISKA develops and delivers training sessions and practical workshops tailored to the specific needs of individual banks.
Training can focus on selected areas of liquidity risk management, including ALM, ILAAP, stress testing, funding planning, liquidity contingency management and reporting.
Our training combines regulatory expectations, methodological approaches and practical challenges encountered in banking operations.
WHO ARE OUR ADVISORY SERVICES DESIGNED FOR?
RISKA advisory services are designed for banks and other financial institutions, particularly:
Risk Management functions.
ALM and Treasury teams.
Finance and business planning functions.
Teams responsible for ILAAP and stress testing.
Regulatory and management reporting functions.
Internal audit and other control functions.
Management Boards, ALCO and other relevant governing bodies.
ADVISORY SUPPORT TAILORED TO YOUR BANK
Liquidity risks vary depending on a bank’s business model, balance sheet structure, funding sources, customer concentrations and market environment.
RISKA therefore provides customized advisory and training services, tailored to each institution’s risk profile, regulatory requirements and organizational capabilities.
Our support may include:
Assessing existing liquidity risk management frameworks and identifying gaps.
Developing policies, methodologies and procedures.
Enhancing ALM and limit frameworks.
Developing and improving ILAAP frameworks.
Enhancing liquidity stress testing methodologies.
Developing funding planning approaches.
Improving Contingency Funding Plans.
Developing management reports and early warning indicators.
Delivering professional training and practical workshops.
LIQUIDITY IS ESSENTIAL TO STABILITY AND CONFIDENCE
Effective liquidity management connects regulatory requirements, business strategy, management accountability and the bank’s ability to respond to unexpected circumstances.
RISKA helps banks develop and enhance liquidity risk management frameworks that support better decisions and long-term business resilience.
Contact us to discuss advisory support, an assessment of your existing framework or professional training tailored to your institution contact@riska.ba
Interested in the first edition of the RISKA Liquidity Risk Management training program? Contact the RISKA Team