Perhaps having some intelligent business practices linked to software will help prevent a recurrence of massive liquidity risk.

About a year ago I asked Andrew Aziz, EVP for risk solutions at Algorithmics, how the industry got trapped in a liquidity crisis that was a full stage production of the dress rehearsal that had been Long Term Capital Management in 2006. Simple enough, he explained, that was 11 years ago and the people who remembered were gone. Not entirely, of course, but the memory had certainly faded. The lesson from that near collapse should have been pretty easy to remember – risk is plentiful until it’s not, and acting as if it is always going to be amply available is asking for trouble.

At the GARP (Global Association for Risk Professionals) conference in London a few weeks ago, the always articulate Bob Scanlon, a senior risk executive at Standard Chartered, noted that SIVs got into trouble by lending for 30 years and borrowing for three months and assuming this could be done forever. Or at least the life of the loans.

It is encouraging to see a technology company like Aleri offering a solution. Often in finance technology drives the business, and here that could be a decided benefit. I was interested to see that the IAFE at its annual in New York 24 June will have a session on liquidity risk and the role innovations such as securitisation can play.

Fine, but what happens when the innovators look to max out leverage in new programs that assume permanent liquidity. That’s why banking experts now say that risk managers need a direct line to senior managers and to at least one or two board members who understand risk.

Citi’s Robert Rubin told Carol Loomis of Fortune, in an article published in November 2007, that he had never heard of a “liquidity put,” part of the bank’s collateralized debt obligations, until the summer of that year. And it was only in early November that the bank mentioned their existence to investors.

Banks are going to face the challenge of having someone on the receiving end who is paying attention and understands the incoming data. Solutions like the one that Aleri has developed will provide immediate information to the right players and give them the platform they need to manage their liquidity risks in accordance with the risk tolerance levels that the board have mandated them to stick to.

Tom Groenfeldt - Financial Services and Technology Journalist at techandfinance.com