Funding Risk

Overview

Funding risk occurs when expected cash, credit, deposits, investment, collateral, or market financing becomes unavailable, delayed, or more expensive. It can prevent an otherwise solvent organization from meeting withdrawals, settlements, payroll, margin calls, or operating expenses.

Maturity mismatch, concentrated funders, confidence loss, collateral declines, market closures, covenant breaches, and sudden outflows can rapidly increase exposure. Crypto businesses may face additional volatility, banking access, stablecoin redemption, custody, and network-settlement dependencies.

Organizations should forecast cash flows, diversify funding sources, maintain liquidity buffers, set concentration and maturity limits, and test severe outflow scenarios. Contingency plans must identify usable collateral, decision authority, communication, and operational steps before stress begins.

Funding risk is the possibility that an organization cannot obtain or retain sufficient financing or liquid resources when obligations become due. Funding risk is about timely access to usable liquidity, so buffers, diversification, maturity planning, and credible contingency actions matter.

For Funding Risk, the assessment should evaluate the possibility that an organization cannot obtain or retain sufficient financing or liquid resources when obligations become due. The assessment record should separate observed evidence supporting the possibility that an organization cannot obtain or retain sufficient financing or liquid resources when obligations become due from assumptions, state the time horizon and existing controls, and identify who owns any remaining exposure. Monitoring should test whether the conditions described in the possibility that an organization cannot obtain or retain sufficient financing or liquid resources when obligations become due have changed enough to require a new rating, treatment, or approval.

Decision-makers should use findings about the possibility that an organization cannot obtain or retain sufficient financing or liquid resources when obligations become due to select treatment, assign remediation, set review thresholds, and document why any residual exposure is accepted.