Implementing ALM frameworks can provide benefits for many organizations, as it is important for organizations to fully understand their assets and liabilities.
· One of the benefits of implementing ALM
is that an institution can manage its liabilities strategically to better
prepare itself for future uncertainties.
· Using ALM frameworks allows an
institution to recognize and quantify the risks present on its balance sheet
and reduce risks resulting from a mismatch of assets and liabilities. By
strategically matching assets and liabilities, financial institutions can
achieve greater efficiency and profitability while reducing risk.
· When assets and liabilities get matched properly, it leads to higher efficiency, increased profitability, and a reduction in risk for financial institutions.
The difficulties in
putting in place a suitable framework are one of the drawbacks of ALM.
· There is no universal framework that can
be used by all organizations due to the stark disparities between them.
Companies would therefore need to create a special ALM framework to record
certain objectives, risk levels, and regulatory limitations.
· ALM is a long-term plan that
incorporates projections and datasets that are prospective.
· ALM is a long-term strategy that
involves forward-looking projections and datasets. The information may not be
readily accessible to all organizations, and even if available, it must be
transformed into quantifiable mathematical measures.
· Last but not least, ALM is a coordinated procedure that manages the overall balance sheet of an organization. It calls for extensive departmental cooperation, which can be difficult and time-consuming.
Finally,
ALM is a coordinated process that oversees an organization's entire balance
sheet. It involves coordination between many different departments, which can
be challenging and time- consuming.