‘Liquidity risk refers to the risk that involves the disposal of assets or selling of assets. An asset that may be sold quickly is regarded as highly liquid. Liquidity risk arises from situations in which a party interested in trading an asset cannot do it because nobody in the market wants to trade for that asset.
In order to minimise the risk of loss, you should ensure that there are sufficient cash or cash equivalent assets within your portfolio to address short term funding needs.’
