Asset and Liability Management

Asset and Liability Management (ALM) is a strategic approach used by financial institutions to balance their assets (what they own, like loans and investments) with their liabilities (what they owe, like deposits and borrowings). The goal is to ensure they can meet their financial obligations while optimizing profits and managing risks, especially interest rate changes and liquidity needs. By carefully coordinating assets and liabilities, institutions maintain financial stability, avoid short-term shortages, and support long-term growth. Essentially, ALM helps organizations manage the timing and amount of cash flows to sustain their financial health.