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smu de solved assignment Q Analyse the significance and objectives of asset liability management.

AnswerThe changing environment in assets and liabilities has brought the following significances of ALM in recent years:
·         Volatility – The globalisation scenario has led to increase in number of economies. This has paved way for market driven economies due to the changing dynamics of the financial markets. These changes are reflected in interest rate structures, money supply, and credit position of the market, exchange rates and price levels. Hence the organisation experiences low market value,
net interest income etc.
·         Product innovation – The innovation in financial products has grown rapidly. Some of the innovations are repacked with existing products with slight modifications. These have major impact on the risk profile in the organisation enhancing the need for ALM.
·         Regulatory environment – The integration of domestic and international market has enabled the regulatory bodies of financial markets to initiate number of measures. These measures prevent major losses that occur due to market impulses.
Management recognition – The top management in the organisation realised that asset liability is neither a franchise for credit disbursement nor it’s a place for retail deposit base. It must be considered to relate and link the asset with liability. Hence the need for efficient asset liability management came into existence.


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