What does the goal of ALM focus on?

Asset-Liability Management (ALM) is primarily concerned with balancing an institution's assets and liabilities in such a way that it manages risks while still striving to achieve an acceptable return on investment. The ultimate goal of ALM is to ensure that the financial institution can meet its financial obligations and manage risks associated with interest rates, liquidity, and cash flows over time.

This approach recognizes that while minimizing risk is important, completely eliminating risk is neither practical nor achievable, as all financial activities inherently carry some level of risk. The focus on acceptable returns highlights the need to strike a balance; organizations seek to make strategic decisions that enhance their profitability while considering the risks associated with their investment and funding strategies. This dual focus on risk management and return optimization is essential for the long-term sustainability and success of financial institutions.

The other options do not align with this balanced approach. Maximizing short-term profits, for instance, may lead to increased risk exposure and not necessarily reflect sound financial management practices. Eliminating all forms of risk is unrealistic, as it would require avoiding all financial activities, which is impractical. Lastly, avoiding any involvement in financial markets does not support the objectives of institutions that rely on market activities for growth and service delivery.