Asset Liability Management Consulting Services At Its Best

Replace Your Risk Management Department
For a Fraction of the Cost

Tuff Risk offers access to a team of MBA’s, CPA’s and CFA’s who have specialized in interest rate risk management for over 20 years. Working with banks and credit unions throughout North America, Tuff Risk has the experience required to manage any balance sheet, regardless of size or complexity.

Tuff Risk has license to FIS’ Ambit ALM software, the software of choice of many large US based and international banks, allowing Tuff Risk to undertake in-depth risk analyses on behalf of all of its clients.

Adding Tuff Risk’s experience, insight and technology to your risk management team makes a lot of sense, as the cost of buying world class software, hiring, and retaining experienced professionals, as well as providing support to your ever expanding in-house team is very expensive. Let Tuff Risk undertake the effort of data base management, balance sheet analytics, liquidity reporting and testing various risk management models while you and your management team focus on strategy.


Mitigate Risk, Add Value and Earn Higher Returns

Over the last twenty years, as interest rates have fallen, effective interest rate risk management is unquestionably the most important cornerstone of any well-run bank or credit union. Over this same 20-year period, Tuff Risk has been working with banks and credit unions to mitigate interest rate risk and to safeguard net interest income.

The primary objective of interest rate risk management is to protect the financial margin built into your product offerings. When pricing products to earn a certain spread, particularly in today’s low interest environment, locking in that spread adds value and in the long-term leads to higher and more consistent returns.

FIS’ world-class Ambit ALM software allows Tuff Risk to develop firm-specific risk management strategies designed to mitigate interest rate risk and to lock-in spread. By creating optimal risk management strategies for your balance sheet, Tuff Risk not only mitigates interest rate risk but also adds value leading to earning higher net interest income.


Secure, Timely and Detailed Reporting

Transferring data to Tuff Risk is seamless and secure through Tuff Risk’s FTP delivery channel. Furthermore, all ALM and liquidity reports are returned to clients through the same FTP delivery channel within days of receiving the data.Tuff Risk ALM Reports are more than just numbers.

Each source of interest rate risk is explored in detail and discussed in the report. Tuff Risk ALM Reports also highlight product behavior, characteristics, and trends. Most important, the delivery of each Tuff Risk ALM Report is followed by an in-depth discussion concerning the various sources of interest rate risk found within the balance sheet as well as the recommended risk management strategies. These discussions ensure all Tuff Risk clients know and understand the precise risk profile of their balance sheet and how to manage any unwanted risk.

Modeling Core Demand Deposits

Although Tuff Risk analyzes the behavior of all products on the balance sheet, we focus quite a bit of our time on the withdrawal actions of customers and the resulting retention levels of core demand deposits. Whereas many financial institutions struggle with core deposit analytics, Tuff Risk presents exceptional experience in modeling the behavior of these unique non-maturity deposits.

The last two decades have provided exceptional data on customer behavior in both rising and falling interest rate environments. Tuff Risk combines insight gained through the analysis of core demand deposit behavior of all its clients with client-specific data to enhance core demand deposit models. Assumptions made with respect to core demand deposits in the ALM model greatly influence the overall risk profile.

“If you put into the machine wrong figures, will the right answers come out?”
Charles Babbage, Passages from the Life of a Philosopher (1864)


Stress Testing Financial Margin and Liquidity

Prepayment Speed

A change in the prepayment speed of loans and mortgages has a great effect on the overall interest rate risk profile of a bank or credit union. Modeling prepayment speeds is more than assuming prepayments rise as interest rates fall and fall as interest rates rise. It is important to know the real behavior of customers before stress testing prepayment speeds. to the point of changing the risk profile all together.

Tuff Risk analyzes the prepayment and payout speeds of each individual retail and commercial loan and mortgage found on the balance sheet to ensure forecasted cashflows are modeled accurately.

Economic Weakness

Although many of the uncertainties that arise during times of economic weakness are out of our control, Tuff Risk believes in the importance of knowing the impact of these uncertainties before they take place.

Falling interest rates:

Yields received on all loans, mortgages and investments are stressed as are yields paid on deposits to determine the impact on
• Financial Margin (Earnings-at-Risk)
• Future profitability (Economic Value-at-Risk)

Increasing delinquency:

People stop paying bills in times of financial stress, so it is extremely important to understand the potential impact on both financial margin and liquidity.

Line-of-Credit Utilization:

A drawdown on unused lines of credit can be anticipated during a period of economic weakness so Tuff Risk recommends a thorough analysis of customer behavior and associated unused lines of credit.

Deposit Drain:

Economic weakness generally leads to a drain on deposits, so understanding the impact of a decrease in retention or a slowdown in acquiring new deposits on liquidity levels is paramount.