What does liability management refer to?

Liability management is fundamentally about the strategic planning and oversight of a company's liabilities to ensure its financial health. This includes ensuring that the organization maintains adequate capital—enough resources to meet its obligations—and liquidity, which refers to the ability to quickly access cash or liquid assets when needed. By effectively managing liabilities, an organization can minimize financial risks that might arise from cash flow shortages or the inability to meet its debt obligations.

The focus on balancing liabilities against assets and ensuring that obligations can be met during different conditions also plays a critical role in sustaining the operational capacity and financial stability of the organization. This strategic approach separates liability management from equity management or the mere pursuit of high-yield investments, which do not directly relate to managing company obligations. The skillful management of an entity's liabilities is key to safeguarding its overall financial health and risk profile.