Stress Testing

Stress testing has become an irreplaceable risk management tool providing valuable insight into the potential changes of a company’s financial, capital and liquidity positions under unfavourable market and economic conditions.

Key Project Experience

• We assisted a UK G-SIB in developing a firm-wide stress testing framework for credit risk exposures in the banking book. As part of the effort we formulated model development standards for macroeconomic models and their use in credit risk stress testing. The model building standards were accompanied by a suite of programming routines facilitating the model building process. A set of pilot models were also built by our model developers.
• As part of a larger CCAR project for a Swiss G-SIB we conducted a gap analysis of existing stress testing models for market risk, operational risk, country risk, pension risk, investment risk, funding risk, and business risk. The analysis identified weaknesses within the existing models and proposed enhancements needed to achieve compliance with CCAR requirements. Our team of analysts helped modify the existing models and build new models where needed, whilst also contributing to the enhancement of the scenario generation process.