Why Use Us for Stress Testing
We're good at it ! Our stress testing is detailed and comprehensive, as is our reporting. We show details but also summarize results so as to be easily understand by the Board, Committees, Management, and Regulatory Examiners.
Our Stress Testing results and summaries also give insight into crucial decisionmaking needed as to Asset Mix, Risk Management, and Overall Short-Term and Long-Term direction.
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Let us work with you to develop and enhance your Stress Testing, Risk Management, and Decisionmaking processes. Reach out today for a free consultation !
Stress Testing An Essential Element of Risk Management
Stress Testing is an essential element of Risk Management. Since the financial crisis (2008-2013), Stress Testing has been considered to be an essential element of Risk Management even at the Community Bank level. Such Stress Testing takes the form of Capital Stress testing, in which various stresses are applied to the loan portfolio and other assets, with an analysis of the effect of such stresses on Income and Capital levels.
Other types of Stress Testing include:
- Commercial Real Estate (CRE) Stress Testing
- IRR Stress Testing
- Liquidity Stress Testing
- Enterprise Risk Management Stress Testing
Stress Testing, when done correctly, is an essential and useful tool in Risk Management, and in assisting the Board, Committees, and Management in making informed and insightful decisions.
Stress Testing The Process of Stress Testing and Methodology
Stress Testing should be done under the auspices of Board and Committee oversight and reporting. The methodology varies depending on the type of stress testing being done, but it generally involves (i) changes to Balance Sheet and Income Statement items, based on various level of stress; or (ii) changes to interest rates, the effect on interest income and interest expense, and the cascading effect on Earnings and Capital; or (iii) stresses on funds availability to meet funding needs, and the resulting effect on interest income and interest expense, and the cascading effect on Earnings and Capital.
When done correctly, Stress Testing is a very effective tool in managing risk and decisionmaking regarding an institution's loan portfolio mix, investment mix, deposit mix, and so on.