The sector’s crisis communication challenge
An investor may have understood the downside risk of an investment without understanding the exit constraints. When tension arises, a delayed explanation easily feels like changing the rules. Preparation must therefore examine the way in which liquidity is presented upon marketing, in discussions with distributors and in reports to investors.
IOSCO published revised recommendations on liquidity risk management in 2025. This article examines a complementary communication problem: how to make management mechanisms understandable without promising availability that assets do not provide? The investment decisions and obligations of each fund must be assessed within their own framework. [1]
Build the risk matrix
The mapping must distinguish a drop in value, a valuation difficulty and liquidity tension. These situations can be combined, but they are not synonymous. The quality of information available on assets, exit requests and investor concentration should be monitored separately. A purely financial matrix may miss the effect of ambiguous wording on behavior.
Scenarios must specify the type of vehicle. An open fund and a closed structure do not offer the same exit possibilities. Reasoning should not transfer the tools from one to the other. Each public message must correspond to the documentation, authorized decisions and the role of the competent bodies.
Prepare decisions and public messages
Investors need to understand what is changing, why and by what process. A phrase like “technical measure” may seem reassuring but does not address the concrete consequences. The explanation must specify the scope, the stages and the modalities of future information, without anticipating a decision not taken.
Sales teams and distributors must receive elements consistent with formal communications. A verbal promise of a quick exit can contradict several pages of documentation. The crisis management team must therefore include monitoring of the questions and formulations used in the field, while respecting the applicable dissemination rules.
Test the response with a crisis simulation
In a fictitious scenario, a publication mentions a difficulty concerning certain assets without specifying the vehicle concerned. Requests are pouring in for several products. The exercise tests the ability to identify confusion, produce accurate information and respond to investors without selective disclosure of sensitive information.
The simulation can add a valuation that is still being verified. The pressure to provide a figure should not lead to an estimate being presented as fixed data. The communication can explain the method and timing of validation, while recognizing what uncertainty means for investors' decisions.
Verify recovery and learn from the incident
The assessment should not be limited to investment inflows. It must examine misunderstandings, discrepancies in discourse between channels and compliance with information commitments. A reduction in exit requests alone does not prove that the communication was understood; market conditions and real possibilities for action also come into play.
A management company protects its credibility when it explains constraints before they become an emergency matter. The crisis matrix is used to identify moments when the commercial language and the reality of the portfolio risk diverging. It is this preliminary work that makes speaking under tension more solid.
Application to the Indian context
For distribution in India, distinguish information addressed to local investors from that intended for international partners. The same liquidity term can be understood differently; the explanations must remain attached to the vehicle and its local documentation.
Sector risk matrix — illustrative example
Hypothetical ratings over twelve months, not a measured company assessment. P × G supports prioritisation; an impact of 5 requires priority attention. Operational thresholds must be set by the competent teams. How to use the matrices
| Scenario | Likelihood | Impact | Score | Warning sign | Decision to prepare | Evidence required |
|---|---|---|---|---|---|---|
| Liquidity tension on an open fund | 3 | 5 | 15* | Internal indicators crossing approved thresholds | Enable fund governance | Flow data and authorized decisions |
| Difficulty of valuation | 2 | 4 | 8 | Insufficient or conflicting data | Explain the process without premature numbers | Validation method and status |
| Confusion between multiple vehicles | 3 | 4 | 12 | Requests based on incorrect scope | Clarify the product and rights involved | Documentation and messages from distributors |
Sector source
[1] IOSCO — Revised Recommendations for Liquidity Risk Management, 2025
Sources accessed on 9 October 2026. Examples are hypothetical and do not describe client assignments.
Further reading
Cite this article
Belief System. Asset management: explain liquidity risk before pressure builds. . https://beliefsystem.fr/en-in/regards/asset-management-liquidity/