focused on macro economic factors affecting capital adequacy, Aleri's LRM solution takes stress testing to a deeper level, modeling expected future cash flows under different scenarios that include both macro and
micro economic factors.
"We began developing the LRM prototype in the wake of the 2007 credit crisis and subsequent liquidity crunch where interbank lending froze that August. Our thesis at the time was that the practice of modeling liquidity risk from a static snapshot of a balance sheet and related mathematical models would give way to a more robust set of requirements that would combine the balance sheet information with a very rich and highly dynamic set of transactional and market information to provide much richer and much more dynamic views of liquidity risk," said Don DeLoach, CEO of Aleri. "While we did not anticipate the extent of the global financial crisis, it is clear that in its wake, the regulatory bodies are moving to adopt far more stringent guidelines for managing liquidity risk, up to and including the inclusion of dynamic transactional and market data. The FSA has already come forward with these guidelines, and it looks like the U.S. and other countries will adopt similar views as well. At its heart, LRM delivers a scenario engine designed precisely to meet those demands."
LRM provides insight into the effects of stress events on enterprise liquidity, enabling more effective contingent liquidity risk management practices and allowing key personnel to calculate liquidity gap positions, identify periods at risk, define and store liquidity scenarios, run stress scenarios against gap positions, intelligently apply and recommend use of counterbalancing capabilities to gap positions, and improve liquidity gap and ratio reporting to regulators.
Additionally, LRM arms liquidity risk managers, senior treasury managers, and treasury dealers with a comprehensive suite of real-time operational liquidity risk analysis capabilities, including:
* Improved forecasting of future liquidity needs or surpluses
* Optimize funding decisions and operations
* Better support for defining contingent funding plans and
* Transparent, enterprise-wide views of liquidity risk scenarios
and mitigation strategies
* Improved compliance with emerging and more stringent regulatory
* Improved capabilities for predicting and responding to future
liquidity exposures and risks
Aleri is now previewing the product to early customers, with general availability planned for end of May.