The liquidity crisis and subsequent failure of some very large financial institutions has underscored the need for robust liquidity risk management practices across all financial institutions. Further, a liquidity shortfall at a single institution can have system-wide repercussions. Financial market developments in the past decade have increased the complexity of liquidity risk and its management.

Effective liquidity risk management helps ensure a financial institutions' ability to meet cash flow obligations, which are uncertain as they are affected by external events and other agents' behavior.