Asset and Liability Management Simulation

In this Asset and Liability Management Simulation, participants step into the roles of bank or insurance company treasurers. Master the critical balance of managing cash flows, mitigating risks, and ensuring regulatory compliance.

Asset and Liability Management Simulation Overview

Participants take on the high-stakes responsibility of managing the core financial risks of a bank, insurance company, or financial institution. The simulation plunges them into a dynamic environment where interest rates shift, customer behaviors change, and liquidity demands ebb and flow. Each decision round represents a new reporting period, introducing fresh economic data, competitive pressures, and potential market shocks.

The core challenge is to align the institution's assets with its liabilities across different time horizons. Participants must develop a cohesive ALM strategy, make tactical adjustments to the balance sheet, manage liquidity buffers, and hedge against key risks like interest rate changes and funding shortfalls.

This simulation emphasizes strategic foresight, quantitative analysis, and decision-making under regulatory constraints, demonstrating how sound ALM underpins institutional stability and profitability. It is ideal for advanced finance students, banking professionals, and corporate treasury teams.

Asset and Liability Management Simulation Concepts

Participants work through realistic scenarios, which can be customized to emphasize or exclude specific topics depending on the learning goals. This modular structure allows the simulation to be tailored to any type of session. Key concepts include:

Interest Rate Risk Management
Liquidity Risk Management
ALCO (Asset-Liability Committee) Governance
Balance Sheet Restructuring
Regulatory Compliance
Funds Transfer Pricing
Capital Management
Behavioral Modeling
Stress Testing and Scenario Analysis
Performance Measurement

Gameflow

What Participants Do

In the simulation, participants will:

Analyze the current balance sheet structure and identify key risk exposures.
Formulate a strategic ALM policy outlining risk appetite and targets.
Make quarterly tactical decisions on new business pricing, investment portfolios, and funding strategies.
Execute hedging transactions to mitigate identified interest rate and liquidity risks.
Respond to simulated market shocks, such as sudden rate hikes or deposit outflows.
Present their ALM strategy and performance results to the "board" or regulators.
Reflect on the trade-offs between profitability, risk, and regulatory constraints.

Learning Objectives

By the end of the simulation, participants will be able to:

Explain the fundamental principles and importance of ALM for financial institutions.
Identify and quantify primary balance sheet risks, including interest rate and liquidity risk.
Develop and execute strategies to manage the duration gap and stabilize net interest income.
Design and justify a liquidity risk management framework that meets regulatory standards.
Make strategic balance sheet decisions that align with institutional risk appetite and capital goals.
Communicate complex ALM concepts and performance effectively to stakeholders.
Evaluate the impact of macroeconomic changes and market shocks on the financial institution's health.
Build confidence in making integrated, data-driven decisions under uncertainty.

How the Asset and Liability Management Simulation Works

This simulation can be run individually or in teams in academic or corporate contexts. Each cycle represents a stage of getting through a pressing financial situation.

1. Receive the Brief Participants are given control of a financial institution's balance sheet, along with its strategic goals, risk limits, and the current economic outlook.

** 2. Analyze the Position** They review detailed reports on gap analysis, liquidity metrics, and profitability to diagnose the starting position.

3. Make Strategic Decisions Each round, teams decide on loan growth targets, funding mix, investment securities, and hedging activities.

4. Collaborate and Negotiate In team settings, participants take on specific roles (Head of Treasury, Liquidity Manager, Risk Officer) to debate priorities.

5. Receive Market Feedback The simulator processes decisions, generates new economic data for the next period, and provides performance dashboards showing NII, EVE, liquidity ratios, and risk exposures.

6. Adapt and Present Teams adjust their strategy based on results and feedback, culminating in a final presentation of their ALM journey and outcomes.

Frequently Asked Questions

Who is the ALM simulation designed for? It is ideal for MSc/MBA students specializing in finance or banking, professionals in corporate treasury, risk management, banking, and insurance, and anyone seeking to understand the core of financial institution management.
How long does the simulation take to complete? A standard delivery runs 4-6 hours but can be modularized into shorter sessions (e.g., 2-hour workshops) or extended for deeper analysis over multiple days.
Is this an individual or team-based activity? It is highly effective in both formats. The team-based version encourages collaboration and role-playing, mirroring real ALCO dynamics.
What kind of metrics and feedback does the simulator provide? Participants receive real-time dashboards with key performance indicators (KPIs) like Net Interest Income, Economic Value of Equity sensitivity, Liquidity Coverage Ratio, and duration gaps, allowing for immediate strategy evaluation.
Can the simulation scenario be customized for our institution? Yes. Core parameters, economic scenarios, regulatory frameworks, and the specific balance sheet composition can be tailored to reflect regional markets or specific institutional types.
How does this simulation help with career preparation? It provides direct, hands-on experience with the core analytical and strategic challenges faced by treasurers and risk managers, building highly valued skills for careers in banking, insurance, fintech, and corporate finance.
Do you provide support for instructors and facilitators? Absolutely. We offer comprehensive facilitator guides, onboarding sessions, and live support options to ensure a seamless implementation. The simulator also includes automated grading analytics.

Assessment

Assessment of participant performance can be tailored according to the host institution’s objectives (business school, corporate training, assessment centre). Typical assessment criteria include:

Achievement of stable Net Interest Income, effective management of the duration gap, and maintenance of regulatory liquidity ratios.
The quality and justification of their ALM strategy and its adaptation to changing market conditions.
Proactive identification and mitigation of interest rate and liquidity risks.
Clarity and persuasiveness in presenting their strategy, results, and risk posture to the "ALCO" or board. In team settings, effective role-playing, debate, and consensus-building.