RISK SCENARIOS ARE MUCH MORE THAN CREDIT RISK
Most firms create scenarios around credit risk. These often refer to a macroeconomic downturn causing an increase in customers not paying their bills. However, there are many events that can significantly affect a firm. Although some of these events may also happen within a macroeconomic downturn, the impact of two or three strategic events occurring even in the best of times can have a dramatic effect on the possibilities of a firm’s survival.
Preparing for the extreme event
A firm can prepare itself by adopting a variety of defensive approaches. Many of these are good risk management and should already exist. However, scenarios test risk assessments and risk appetite and it is vital that the defensive ...
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