Stress Testing
What is Stress Testing?
The simulation of extreme but plausible scenarios to evaluate an organization's ability to withstand significant adverse events and maintain operations.
Terms that appear alongside stress testing
Each of these is named in at least one of the same controls as stress testing. The number is how many controls name both.
- governance 6 shared controls
- cybersecurity 4 shared controls
- resilience 3 shared controls
- audit 3 shared controls
- accountability 3 shared controls
- scenario analysis 3 shared controls
- compliance 3 shared controls
- integrity 2 shared controls
Frameworks that govern stress testing
What the standards actually require on stress testing
Requirements naming stress testing across 6 standards, quoted from the control text.
Gives the key elements of an effective stress-testing programme: objectives; process, policies and procedures; governance, resources and infrastructure; risk identification; approaches, models and methodologies; design and setting of stress scenarios;
hkma-spm::IC-5 · IC-5 Stress-testing →Stress testing is part of investment management. Baseline: stress and scenario tests of 'what if' impacts on material exposures. Higher levels add a suite covering investment, liquidity and capital across interest rate, credit spread, equity and climate scenar...
principles-for-doing-business-at-lloyd-s::P8.3 · 8.3 Investment stress testing integrated into investment management →The bank must have documented, senior-management-approved policies that define which instruments go in the trading book, with transfers between books allowed only in very limited circumstances (SRP33.1, SRP33.2).
basel-iii-international-banking-framework::SRP33 · Govern trading book boundaries, valuation and market risk stress testing →The ERM framework must quantify risk and risk interdependencies using a sufficiently wide range of techniques for risk and capital management and, as necessary, include stress testing of the resilience of the total balance sheet against macroeconomic stresses.
iais-insurance-core-principles-icps::16.2 · 16.2 Quantification under a wide range of techniques and, as necessary, total-balance-sheet stress testing →The risk management framework must include forward looking scenario analysis and stress testing programs proportionate to the size, business mix and complexity of the institution and built on severe but plausible assumptions.
CPS220-14 · Scenario Analysis and Stress Testing Programs →Requires the Commission, supported by the Board, to monitor critical raw material supply chains, identify supply risks and disruptions, and perform regular stress tests on the supply chains of strategic raw materials.
CRMA-Art.20 · Monitoring and stress testing →Questions people ask about stress testing
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