Strategy Development for “Wholistic” ALCO

Map your next steps to effectively manage Asset Liability Management (ALM) risk.

Identifying what your risks are is crucial, but it’s still only half the battle. The next step in a comprehensive ALM approach—such as DCG’s “Wholistic” ALCO process—is developing the strategic ideas to effectively manage that risk while maximizing your income.

When it comes to developing strategies geared toward improving your overall balance sheet management, it is important to look at the many alternatives available. These alternatives should be modeled, analyzed and documented as part of the process. The documentation should also include an assessment of the risks and rewards of each strategy discussed. Remember, there is no such thing as a free lunch. It is also important to remember that the course of no action is still a strategic decision and should be assessed accordingly.

Have these potential strategies been tried by other institutions or in other areas, and were they successful? Do you know how the regulators have reacted to the strategies you are discussing? Are these strategies the right ones for your institution and profile? Having access to that kind of knowledge from an independent practitioner of “Wholistic” ALCO can be the key to successful strategy development and implementation.