Chapter 7

Stress Testing for Success

In This Chapter

arrow Looking at the benefits of stress

arrow Creating plausible stress scenarios

arrow Making use of stress test results

arrow Composing stories to use with scenario analysis

arrow Validating stress test and scenario analysis results

You may find it easier to understand the stress tests and scenario analysis I describe in this chapter if you think about them in a home environment instead of a financial institution. To stress test your home, think of a plausible extreme event: Say a sudden storm knocks out electric power and communication and temporarily makes travel difficult or impossible. Imagine that it happens right now and you haven’t assembled an emergency kit or bought the generator you’ve been thinking of getting. Assume you haven’t made any preparations.

A stress test consists of discovering and listing your assets and liabilities. Your assets are the things you have that can help in an emergency. Your liabilities are the things you must do during an ...

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