CHAPTER 4

Stress Testing and Risk Management

Stuart Burns

Standard Chartered Bank

What Is Stress Testing?

The term “stress testing” can mean something different depending on who is using it and in what context. In this chapter, some observations about the current status of stress testing in financial institutions and the possible ways forward from this will be discussed. First, however, the approaches to stress testing and scenario planning commonly in use are outlined.

A “scenario plan/analysis” typically looks at an event or scenario and uses expert judgment to develop possible impacts from this. Hence, if the scenario is an outbreak of avian flu transmitting to humans, we would typically think about what the economic and people effects ...

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