Tips to Enhance Your ALM Process



Does it sometimes feel, as a credit union CFO, that you carry the weight of the regulatory world on your shoulders? Assessing your CU’s analytics and financial reporting processes is key to extracting yourself from some of this burden. And that assessment should begin with a review of your ALM practices.

Can you believe it’s been nearly eight years since the financial crisis officially started? For most financial institution CFOs, it must seem like much longer. In the wake of the burst mortgage bubble in 2007 and the 2008 fall of Lehman Brothers, banks and credit unions have seen their regulatory burden increase dramatically, with the lion’s share of the load falling on their CFOs’ shoulders. Not only must they manage their institutions’ financial reporting, treasury functions, financial forecasting and modeling, but they also must balance risk and reward in a regulatory climate that seems to become more complicated and onerous every year.

Given the complexities of today’s asset/liability management process, CFOs should regularly assess whether their institutions’ analytics and financial reporting processes are appropriate to inform strategic decisions as well as to determine their level of risk vs. liquidity and capital adequacy. By appraising current processes and additional options, you can ensure the best outcomes – and a healthy future for your institution.

Review your ALM practices.

  • Use appropriate ALM software. – The right software can ensure your ability to conduct modeling that meets your credit union’s needs. The basics are to analyze various scenarios to produce required regulatory and in-depth liquidity forecasts. However, financial institutions with more complex balance sheets might need more sophisticated modeling. More specifically, for more accurate and insightful results, they may require stochastic modeling of embedded options and loan-level analytics.
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