What Is Asset/Liability Management? Although it has evolved over
time to reflect changing circumstances in the economy and
markets, in its simplest form, asset/liability management
entails managing assets and cash inflows to satisfy various
obligations. It is a form of risk management, whereby one
endeavors to mitigate or hedge the risk of failing to meet these
obligations. Success in the process may increase profitability
to the organization, in addition to managing risk.  Some
practitioners prefer the phrase "surplus optimization" as better
to explain the need to maximize assets available to meet
increasingly complex liabilities. Alternatively, surplus is
known as net worth, or the difference between the market value
of assets and the present value of the liabilities and their
relationship. The discipline is conducted from a long-term
perspective that manages risks arising from the interaction of
assets and liabilities; as such, it is more strategic than
tactical.  A monthly mortgage is a common example of