Developing an Effective ALM Report

The challenge of creating an asset/liability management report is developing a format which can accurately and clearly communicate results.


The most important aspect of any asset/liability management (ALM) process is effectively communicating the results to the board, Asset Liability Committee (ALCO) and senior management. The objective is to create a series of reports that accurately reflect management’s best estimate of the credit union’s interest rate and liquidity risk. However, the challenge is putting this data in a format that everyone from your board to senior managers can understand.

Commercial and proprietary ALM applications use a number of standard metrics to build their reports. These include net economic value (NEV), gap analysis, duration sensitivities, or net-income simulation. Individually, each of these has its strengths and weaknesses as a tool to quantify and mitigate interest rate risk.

The difficulty is determining how to present this data into a set of reports that will meet four objectives:

  • Present the risk position in a format that is easy to understand
  • Help the recipients of the reports make better decisions
  • Secure buy-in from senior management and the board on the validity of the information contained therein
  • Offer both tactical and strategic guidance in managing the balance sheet within assigned risk parameters

Below is an example of a standard ALM report from WesCorp that meets these four objectives.




Oct. 11, 2004


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