Module: | MODULE B: RISK MANAGEMENT
Q454: Consider the following statements regarding the Management Information System (MIS) utilized by the Asset-Liability Management Committee:
1. The Management Information System utilized by the Asset-Liability Management Committee must be highly granular, capable of tracking daily liquidity positions down to the individual branch level.
2. A robust Management Information System automatically executes massive wholesale market borrowings without requiring any manual approval from the Asset-Liability Management Committee.
3. The Management Information System must provide accurate, forward-looking cash flow data to help the Asset-Liability Management Committee effectively prepare and manage the Dynamic Liquidity Statement.
Which of the statements given above is/are correct?
2. A robust Management Information System automatically executes massive wholesale market borrowings without requiring any manual approval from the Asset-Liability Management Committee.
3. The Management Information System must provide accurate, forward-looking cash flow data to help the Asset-Liability Management Committee effectively prepare and manage the Dynamic Liquidity Statement.
Which of the statements given above is/are correct?
✅ Correct Answer: C
The correct answer is C. Statement 1 is correct: The effectiveness of the Asset-Liability Management Committee (ALCO) is entirely dependent on the quality of its Management Information System (MIS). RBI mandates that the MIS must be highly granular, meaning it shouldn't just aggregate data at the corporate level, but must possess the capability to drill down and track daily cash flows and liquidity mismatches at the individual branch and product level.
Statement 2 is incorrect: An MIS is strictly a data reporting, analytics, and decision-support architecture.
It does not possess autonomous executive authority.
While it highlights liquidity gaps, it cannot automatically execute massive wholesale market borrowings.
All strategic funding decisions and market executions require explicit, manual authorization from ALCO and the Treasury desk.
Statement 3 is correct: Liquidity risk management is inherently predictive.
The MIS must supply highly accurate, forward-looking cash flow projections (expected inflows vs outflows) to empower ALCO to prepare the 90-day Dynamic Liquidity Statement and proactively mitigate upcoming funding bottlenecks.
Statement 2 is incorrect: An MIS is strictly a data reporting, analytics, and decision-support architecture.
It does not possess autonomous executive authority.
While it highlights liquidity gaps, it cannot automatically execute massive wholesale market borrowings.
All strategic funding decisions and market executions require explicit, manual authorization from ALCO and the Treasury desk.
Statement 3 is correct: Liquidity risk management is inherently predictive.
The MIS must supply highly accurate, forward-looking cash flow projections (expected inflows vs outflows) to empower ALCO to prepare the 90-day Dynamic Liquidity Statement and proactively mitigate upcoming funding bottlenecks.