Management
Stress Testing: How to get it right
Fusing People, Processes and Platforms
2
The Failures of Stress Testing
The recent financial crisis
claimed numerous victims.
Along with the financial
institutions that failed,
the concept of stress
testing lost a great deal
of credibility. Measures
seeking to define the
impact of a specifically
defined systemic shock
failed their ultimate
reality test, which is to
provide an early warning
signal so that firms’ risk
management procedures
would operate as
intended.
Stress testing became an integral
part of the risk management function
of nearly all banks that invested
considerable amounts of money and
extensive effort to develop stress
testing methodologies, appropriate
processes and the supporting IT
capabilities (reporting and data
processing) needed to accurately
report and manage their risks. This
gave banks confidence that they could
deliver returns while keeping their
risks under control. The crisis, however,
proved that the models were poor,
and the assumptions made for the
stress testing scenarios were faulty.
Due to failures in risk management
governance, senior managers did not
use insights derived from stress testing
to actively engage lines of business
and address problematic activities.
A number of systemic issues
contributed to the failure of stress
testing to assist institutions in
managing their risks, identifying the
key issues within firms and suggesting
practical ways of managing banks'
risk while complying with financial
regulations.
In the past two years, most banks have
made improvements to their stress
testing capabilities. They have engaged
a wider range of stakeholders – from
senior management to the frontoffice — in the definition of stress
testing scenarios; enhanced their
stress testing capabilities in credit and
liquidity risk; and strengthened their
control and validation mechanisms.
Much, however, still needs to be done.
Stress testing must be embedded
into the decision-making process in
a consistent fashion across business
units, upgrading their valuation
models and, ultimately, overcoming
capability limitations such as data
management problems and constraints
imposed by legacy systems across the
organization.
With more market and regulatory
changes facing the financial services
industry, banks need effective stress
testing to protect their balance sheets
and their power to generate revenue.
New approaches to design and
implementation of stress testing are
clearly necessary.
3
Identifying the Challenges
Many banks have taken measures
to improve the effectiveness of risk
management within their firms, and
to improve stress testing capabilities.
The previously demonstrated shortfalls
in stress testing have led to a lack of
credibility and confidence and limited
buy-in from senior management in
basing key decisions or preventative
actions on stress testing results.
Stress testing should be seen within
the wider context of the effort
banks put into improving their risk
management capabilities. Banks face
common challenges including:
• Improving risk governance and board
oversight
• Integrating approaches to risk
management
• Enhancing stress testing
methodology
• Changing stress testing processes
and operating models
• Significantly enhancing data and
systems
• Extending reporting functionality
Improving Risk
Governance and Board
Oversight
Regulators and other stakeholders
have demanded that banks improve
their risk governance in a number
of areas. In response, banks have
changed the composition of their
boards, adding members with
relevant experience in financial and
risk management issues. Banks have
also created board committees to
focus on formal risk issues, while
others concentrate on risk oversight.
Boards are becoming more involved in
defining and articulating banks’ risk
appetites and their engagement in
stress testing exercises.
Risk appetite – the amount and type
of risk that a company is able and
willing to accept in pursuit of its
business objectives – has become one
of the yardsticks for aligning business
strategy with risk management. Risk
4
appetite is strongly linked to stress
testing as banks seek to measure their
tolerance in a range of environments,
including normal conditions,
extraordinary conditions and stress
scenarios. Banks establish specific
levels of risk appetite and monitor
how they perform over time, taking
all types of risk into consideration.
In this context, stress testing is used
to see how the firm responds to
adverse market conditions in terms of
risk sensitivity and risk management
effectiveness.
Banks still face the challenge of
embedding risk appetite in decisionmaking across business units and
making it an essential tool for lending
and trading. It is difficult to develop
stress testing scenarios which really
test the risk approach taken by banks
while identifying secondary effects.
The stress testing capabilities of most
banks are limited and are currently
concentrated on market risk, where
the traditional stress testing activities
(established since the creation
of the Market Risk Value at Risk
methodology) are in place.
In addition, lack of credibility and
confidence in the stress testing
framework led to limited willingness
on senior management’s part to make
key decisions or restrict specific
activities based on the results.
Integrating Approaches to
Risk Management
Since existing stress testing tools and
frameworks have proven inadequate,
banks still face a challenge in
developing effective stress testing
methodologies and procedures. A
primary deficiency is in applying an
integrated view of scenarios which are
relevant and applicable to the bank’s
risks, including market losses, credit
losses, and reputation and liquidity
risks. There is limited understanding
of banks’ risks and positions across
books and portfolios, and not all banks
define scenarios in a consistent and
effective way.
Before the financial crisis, existing
methodologies and procedures such
as Value at Risk (VaR) and Economic
Capital were designed to give
management an overall net view of
risk. These were useful but incomplete,
as they disguised the size of individual
positions. Exposures were netted
and reduced by hedges and further
reduced by correlations, hiding the
true size of gross exposures.
Regulators exercise further pressure
to provide aggregate exposure and
risk information across product
lines, businesses and legal entities.
This remains challenging to many
banks due to requirements for
substantial investments and expert
personnel, as well as because of the
timing of implementation for these
requirements.
Other challenges include the definition
and type of scenarios being tested. It is
difficult to define the scenarios which
are useful both to the business and to
the risk management function. Doing
so requires active participation from
a number of different stakeholders.
The participation of business lines,
finance, risk control, risk methodology
and even specialist groups, such as
economists, under the supervision and
participation of the board remains a
challenge.
Other limitations include the type of
scenarios previously used, which may
not be sufficiently severe. They may
depict impacts which are too small,
management actions which are overly
optimistic and assumptions which are
too favourable. Short holding periods
and limited durations or investment
horizons failed to take into account
the possibility of extended periods of
market disruption, global economic
slowdown and contagion as disruption
spread from one market to another.
Enhancing stress testing
methodology
Banks — and regulators — want to
develop an integrated approach to risk
evaluation. This would help them see
the effect of events on different risk
types which, when combined, could
result in an outcome different from
those foreseen under a non-integrated
approach.
Although some banks have strong
capabilities for modelling the effects
of stress events on different risk
types, these capabilities are generally
isolated, with little or no interaction
across risk types. Often behavioral
assumptions are inconsistently applied
– for instance, in predicting the drawdown of off-balance-sheet items.
Based on the particular view of the
business units and geography, different
stress events are fed into each model,
different assumptions are used in each
model, and the results of each model
are reviewed independently but using
different measures. The process may
be iterated within individual units to
show evolution over time.
Some banks have a better
understanding of stress testing as it
applies to market risk, but a poorer
understanding of credit stress testing
and other types of stress tests, such as
the combined effects of risk events on
market and credit activities, secondary
macroeconomic effects and other
events.
Another new area is the development
of stress testing models across
economic downturns, more commonly
known as pro-cyclicality in internal
risk management. Banks need to
develop models which address the
secondary effects of risk in their
capital structure and strategy. Internal
risk management is typically unable
to incorporate effects from other
risk areas and, when combined with
a lack of consistency in risk models
used, cannot easily be aggregated into
useful insight for the business.
The lack of integrated stress testing
through the economic cycle has deep
implications for banks, as they do not
have the information necessary to
assess whether they are vulnerable to
a single event resulting in unforeseen
effects across risk types. A similar lack
of information prevents banks from
gauging their exposure to feedback
loops across real world risk types.
Finally, most banks realize that modelbased stress testing is not sufficient
and that more judgment on defining
and applying scenarios is required. The
dimensions of stress testing must be
extended in order to provide banks
with sufficient understanding of the
impact on income, provisions, RWA,
(Risk-Weighted Assets) and economic
and regulatory capital as well as
capital supply.
Changing the processes
and the operating model
for stress tests
un-integrated and focused exclusively
on areas such as markets and credit
without providing a comprehensive
view.
Many obstacles stand in the way
of establishing efficient and robust
processes for stress testing. These
include the evolving risk methodology,
the provision of key information from
the front office or other parts of the
organization, the lack of processes
for collecting data from new sources
such as the treasury function, and the
integration of liquidity management
into the process. Although banks
often intend to establish a systematic
and more comprehensive approach to
stress testing, they still lack consistent
implementation of a robust stress
testing framework.
Legacy systems are another hurdle
in the implementation of the new
stress testing scenarios. Some systems
operate on platforms that require
specialist knowledge and do not lend
themselves in open interfaces so that
the appropriate data can be identified
and extracted.
Two areas merit special attention
in the current process framework.
One is the area of contingency
planning and early actions processes.
In many banks, these are not well
organized and lack active preparation,
monitoring, planning or structure to
allow for coordinated action in time
of real stress, such as specific or
enterprise-wide crisis management.
The other new area for banks is
control and validation. As currently
structured, control and validation
mechanisms do not adequately control
the effectiveness of stress testing
methodologies and related procedures.
Although some banks have a formal
process for the definition of stress
testing as part of the wider definition
of risk appetite, the definition is not
always communicated to the business
units and not properly controlled
and validated. Banks also need to
develop independent validation of
their stress testing frameworks from a
quantitative and qualitative viewpoint,
as validation techniques are currently
very limited.
Challenges also exist in the
aggregation of data across line of
business and different legal entities.
Some banks use multiple, complex
procedures to aggregate data but
the speed and the quality of data
assembled are not necessarily
satisfactory.
Extending the
functionality of reporting
Banks need better reporting on the
results of valuation stress tests.
This is particularly true for the new,
evolving methodologies, which involve
significant use of unobservable inputs
and model parameters. New initiatives
within banks involve the embedding
of risk sensitivity analysis in financial
reporting. This means that banks
need to capture and report more
information on the assumptions used
to derive fair value analysis, as well as
on more macroeconomic parameters.
Reports also need to include
information about unobservable
parameters, both in isolation and
under correlated assumptions.
Enhancing Data and
Systems
One of biggest challenges faced by
banks in the implementation of an
integrated stress testing framework is
the need for data and system upgrades
to meet the new requirements.
This is due, in part, to existing risk
management systems which remain
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6
Enhancing the Stress Testing Framework –
How to get it right
Almost all banks have
put particular emphasis
on strengthening
their stress testing
capabilities and consider
the implementation of
an effective and wellintegrated stress testing
framework as work-in
-progress. It is within this
framework that Accenture
has developed an
approach to assist banks
in creating a stress testing
framework capable of
helping banks meet their
evolving needs.
Our approach includes
five key components
which, in most of cases,
are part of the stress
testing framework:
• Stress Testing Risk
Governance and Oversight
• Stress Testing
Organizational Design and
Processes
• Stress Testing
Methodology
• Stress Testing Data and
Systems
• Stress Testing Reporting
7
Stress Testing Risk Governance and Oversight
Figure 1: Risk Governance Framework and Executive Oversight
The Board
Portfolio Risk
Committee
Business Planning
Material Risk
Assessment
Set Risk Appetite
and Performance
Targets
Capital Committee
Set Performance
Objectives
and Strategy
Economic Capital Management
Internal Capital Adequacy Assessment Process
& Capital Framework
Measure Risks
Performance
Management
Capital Optimization
and Risk Transfer
Risk Mitigation
Top-of-House Finance Committees (ALCO)
Create Risk Profile
Risk
Finance
Capital
Contingency Plan
Balance Sheet
Management
Portfolio
Management
Integrated Risk & Finance
Setting the tone from the top (i.e.
at board level) is essential for the
successful implementation of a stress
testing framework which ensures
that stress testing is embedded in
the decision making of the business
in key areas such as capital planning,
loss absorption, provisions and
capital supply (Figure 1). There should
be one committee, composed of
the appropriate members of senior
management, who bring together the
demand and supply sides of capital.
Stress testing results should be key
inputs for senior management and
board discussions. Stress scenarios
should be reviewed, updated and
expanded regularly in the context of
the macro-economic and geopolitical
environment by a committee
comprised of representatives from the
business divisions, risk control and
economic research.
The engagement model with internal
and external stakeholders is critical
in driving the appropriate behavior
within the bank. It will also assist in
establishing a balanced and holistic
8
Capital Adequacy
Capital Monitoring
and Reporting
view of the bank’s risks with respect
to the intended strategic objectives,
balancing the needs of day-to-day
risk management with long term
strategic objectives for stable capital
requirements.
Current committees should
be assessed in regard to their
effectiveness in implementing an
integrated stress testing framework
across business lines, geographies, and
legal entities. A clear definition by the
Stress Testing Committee of its model
of engagement with all stakeholders,
as well as its governance model for
the stress testing function within the
bank is essential. Stress testing is an
evolving function within the bank and
should be seen as work in progress
requiring familiarity and support from
the board down.
The composition of the stress testing
committee is critical in providing
valuable input to the board’s decision
making. Regional risk managers,
front office and treasury should
participate in reviewing actual market
risk exposures and market events
in determining the scenarios to be
applied at portfolio and consolidated
levels.
The right governance model will
help ensure that the stress testing
organization works in accordance
with its goals, and that models and
methodologies are consistently applied
across all business units, with the
results of stress testing used to steer
business behavior.
Figure 2: Stress Testing: Integrated Approach
Management
2 Embedded Capital & Liquidity Management with Enterprise Performance Management
2 Integration of Capital & Liquidity into
Enterprise Performance Management
Process
3
3 Robust Process of Internal Capital
Adequacy Assessment
Capital Management Function
Capital
Demand
Capital Supply
Management & Management
Measurement
Capital
Efficiency
& Optimization
Liquidity
Management
Function
Capital
Allocation
Pillar 1 Capital Ratio
Credit
Risk
Market
Risk
Operational
Risk
Integrated Approach
Establishing an integrated approach
to the use of stress testing results
requires clear governance, active
participation of all stakeholders,
dedicated funds and a focus on
program management.
It is important to establish clear
governance not only within the board,
but also across divisions, business
units and geographies. Banks should
review the current engagement model
for stress testing and assign clear
responsibilities and touch points from
the front office to the board (Figure
2). A key governance responsibility is
to ensure that the new structure is
integrated across all business lines and
is actively used in decision-making.
5
Pillar 2 Capital
Add-on
Interest
Rate Risk
in the
Banking
Book
Other
Risks
(Strategic,
Reputation)
4 Integrated Approach to Sensitivity &
Stress Testing
5 Identification and Measurement of
Materials Risks
Integrated Stress Testing
4
Measurement
1 Integrated Oversight and Strategy for
Capital / Liquidity Adequacy
Top-of-House Committees & Board Oversight
1
Liquidity Asset
Buffer
6 Enhancement of Liquidity Risk
Management Processes
6
Liquidity Risk
the target operating model for
stress testing in the initial phases
of the implementation program will
significantly increase the chances of
success. As stress testing skills are
scarce within any organization, the
systems required for integration are
usually quite large and in flux; and,
since stress testing competes with
other priorities within the bank, it is
imperative to establish synergies and
early buy-in for the program.
The successful transformation of
the stress testing function depends
upon establishing a budget dedicated
to the implementation of the new
stress testing platform. Identifying
9
Stress Testing Organizational Design and Processes
Processes
Figure 3: Stress Testing Process Framework
Risk Factors
Scenario
Generation
Scenario
Execution
Measure
Effects
Discretionary
Actions &
Hedge
Effectiveness
Assess KPIs
Contingency
Planning
Secondary Effect
Iterate Process
Implementing an integrated approach
to stress testing will have broad and
deep effects on the organization, as
integration involves the alignment of
processes from the board level to the
front office across all geographies.
We propose a Stress Testing Process
Framework comprising seven stages as
depicted in Figure 3.
Risk Factors
Identify systemic and idiosyncratic
risk factors and correlated risk factors
applicable to the portfolio
Scenario Generation
Generate master scenarios, scale
shocks (Mild, Medium, Severe) and
finally generate portfolio specific
shocks
Scenario Execution
Make requests to risk applications for
risk measures execution, orchestrate
risk measures results from risk
applications, update risk reporting
hierarchies with risk measure results
according to aggregation rules
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Measure Effects
Generate stressed risk weighted assets,
generate stressed Tier1 and Tier 2
capital, asset liquidity effects
Discretionary Actions & Hedge
Effectiveness
Migrate impact of scenario (Tier 1 and
2 capital) due to discretionary action
(e.g. a dividend reduction)
Assess KPIs
Measure key financial and capital
ratios indicators
Contingency Planning
Incorporate results in contingency
plans
To accomplish this, banks can employ
a target operating model which uses
a mix of Centre of Excellence, Shared
Service and Dedicated Enterprise Risk
Functions (Figure 4).
The establishment of the stress testing
operating model should take place
within the wider context of the risk
transformation programs that most
banks have undertaken. Among the
factors which affect the design are
the bank’s decision-making process,
its stress testing methodology, its risk
capability and the maturity of the
organization. The critical resources
needed for design and execution of
stress scenarios are scarce and are
typically more attuned to the nonintegrated risk analysis approach, with
separate assessments of market risk,
credit risk, and interest rate risk.
Multivariate risk analysis across
different types of risks – as some
banks pursue integrated market and
credit risk stress scenarios – demands
the consolidation of risk expertise into
a shared services model. Integrated
risk stress tests which include
macroeconomic stresses, however,
tend to gravitate toward a centre of
excellence model. Both models may
be deployed depending on the DNA
of the bank. Finally, allowing for more
dynamic definition of stress testing
with the active participation of the
front office will require a different
model of engagement between the
middle and the front office.
Figure 4: Stress Testing – Processes and Operating Model
Scenario
Management
Scenario
Execution
(Centre of Excellence)
(Centre of Excellence)
Factor Sensitivity
Scenario
Management
Credit
Reporting &
Actions
Aggregation
Individual Risk
Reporting
Hedging &
Management Actions
KPIs & Early
Warning Indicators
Net Risk, Capital &
Liquidity Position
Executive
Management Reports
Second Round
Effects
Actions
Market
Scenario Generation
Gathering
Information
Interest Rate
OpRisk
Plausibility Test
Reputation
Business & Strategic
Mapping & Dispatch
Centralize
Concentration
Distributed
The footprint and the location
capabilities of the bank should
be considered in the design and
implementation of the stress testing
function. System infrastructure, data
availability and risk management
maturity should also be part of the
mix. The stress testing organization
must also be mapped against a number
of business process hierarchies,
including risk appetite, stress testing
and risk management, stress test
validation and stress testing reporting.
Risk appetite is central in steering
banks’ business operations. Stress
testing processes need to be fully
aligned with risk appetite processes,
as the concept of risk appetite is still
evolving and gaining acceptance
among banks’ managements.
For stress testing and risk management
processes, the organization must be
capable of supporting four scenario
types: Macroeconomic stress, which
entails multi-year systemic shocks
to assess the Group’s ability to
meet its capital requirements and
liabilities as they fall due; Enterprisewide stress scenarios, which are
not macroeconomic in nature but
are sufficiently broad to affect
multiple risks or divisions, and are
also likely to affect earnings, capital
and funding; Cross-divisional stress
scenarios, which test across divisions
for sensitivity to a common risk
factor, such as corporate portfolios;
and Divisional stress scenarios,
which are undertaken to support risk
identification and management in a
division-specific manner.
The processes implemented by the
stress testing organization should
allow for iterative sub-process
execution to respond to the real
business situation. We believe that
the process framework must include
six process hierarchies: Scenario
Definition – Risk Factor Identification,
Scenario Generation, Measurement
Analysis, Discretionary Actions
and Hedging Effectiveness, KPI
Performance Analysis and Contingency
Planning.
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Stress Testing Methodology
Methodology shapes the operating
model of the stress testing
organization, as well as the risk
architecture underpinning the data
and applications used in implementing
stress testing throughout the bank.
The bank must implement an
integrated stress testing methodology
using both top down and bottom
up approaches. In the bottom up
approach, the impact of shocks and
scenarios are estimated using data
from individual counterparties and
exposures. This enables the bank to
capture the concentration of risks
and possible contagion, and should
generally lead to more precise results.
Due to lack of high-quality data
needed to perform calculations – and
to the complexity of the calculations
themselves – it is important to
build a methodology which evolves
over time through a series of small
changes. Acceptance of new modeling
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assumptions is a lengthy process and
requires universal acceptance.
The top down approach — where the
impact of shocks and scenarios is
estimated using aggregated portfolio
data – is less calculation-intensive,
and it places fewer demands on
individual counterparty, facility and
security data for scenario testing.
Top down estimating should always
be part of the methodology, as it can
assist the business with a quick, high
level view in difficult economic cycles.
Applying tests only to aggregated
data, however, can overlook the
concentration and correlation of
counterparties and exposures within
individual portfolios.
The banks must assess methodologies
against emerging trends, such as iVAST
(integrated VaR and Stress Testing) or
integrated market and credit risk, and
agree with stakeholders on the current
methodologies and the strategy for
their improvement. In addition, banks
must establish a clear approach to
the definition of scenarios, risk factor
data, risk hierarchies, measurement of
stress and other testing elements.
Stress Testing Data and Systems
Figure 5: Stress Testing Platform
Contagion
Direct Market Event
Bank Event
Macroeconomic Model
Risk Dependence & Correlation Model
Scenario / Risk Factor Sensitivity
Top of House Committees & Board Oversight
Risk Engines
Credit
Market
Interest Rate
Liquidity
Risk Models
Reputation
Business & Strategic
Concentration
Aggregation, Analysis & Reporting
The data requirements for an
integrated approach to stress
testing demand a risk stress testing
platform (Figure 5) which comprises
one or more data feed engines, a
risk aggregation engine and a risk
reporting engine. The stress testing
platform should adopt a “federated
architecture” which allows the
scenario execution to be implemented
across different risk applications of
the bank. The platform should be able
to aggregate risk results at various
aggregation levels such as at risk
sensitivities, risk factor hierarchies
at product level, risk concentrations
at portfolio level, risk measurements
at business entity and risk exposure
results at the legal entity level. Such
architectures could be described as a
“risk entity particles engine”.
The data feed engine component of
the platform should be able to extract
appropriate data from approved
sources. It should deploy the data
orchestration principle whereby critical
risk data is collected on an “available
to use“ basis and is forwarded
when the relevant interrelated risk
measures are available and complete.
For example, risk valuation data and
associated risk measures should be
available for all positions from a
product line, for a region, or for a
legal entity. The data feed engine
component should be in full alignment
with the data operations of the bank.
The risk aggregation engine is
responsible for assembling information
pertinent to risk measures at different
aggregation levels while applying
business rules for risk and finance to
the aggregated data and managing
the data store. The underlying data
store maintains data along a number
of different dimensions, including risk
factor hierarchies, trade data, static
data, daily valuations, sensitivity
data, business entity exposures,
VaR, and EaR (Earnings at Risk). The
business rule engine is responsible
for aggregating the data according
to portfolios, business hierarchies,
accounting rules and other protocols.
well as in light of the stress testing
governance model, which reflects the
group structures of the bank and the
role of the risk function.
No matter what governance model
is selected, we believe that a stress
testing platform incorporating
the key components described
above should be implemented and
seamlessly integrated with existing
risk applications. It is important,
as well, to develop a standardized
communications protocol to distribute
scenario instructions and gather
data from risk engines. Each risk
engine should support the execution
of scenarios defined outside its
immediate environment. Risk metrics
should be managed centrally and
should be suitable for re-use as inputs
for second effect testing.
Banks should identify candidate
applications for the implementation of
the aggregation, analysis and reporting
components of the platform. Finally,
they should establish interoperability
standards with treasury and finance
applications (such as liquidity risk
and capital management) in order to
establish early warning system/key
risk indicators. Finally, banks should
ensure that the stress testing platform
can execute the stress test process
within varying business tolerances,
such as within 10 days under normal
and within two days under stress
conditions.
The architecture and implementation
of the stress testing platform must
be considered within the context of
banks’ current risk architecture, as
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Stress Testing Reporting
The risk reporting engine should be
able to generate reports in a variety of
formats and across the different data
dimensions stored in the database.
Critical to the implementation of
such a risk reporting engine is the
ability to maintain linkages among
risk model data, macroeconomic data,
and on-and off-balance sheet data,
and to store and present quantitative
and informal analysis data. The stress
testing platform must be able to
support reporting across product lines,
business and legal entities. Supporting
such features is central to establishing
the stress testing function as a critical
tool for making decisions on the
direction of the business at all levels
within the bank.
stress testing is used in the bank, the
assumptions made, methodology used,
actions plans and similar elements.
The stress testing reporting layer of
the stress testing platform should be
flexible and able to support new risk
measurement data as the stress testing
methodologies mature and more
comprehensive coverage of stress tests
is implemented across other types of
risk including operational, liquidity,
country, and reputational.
Finally, the reporting layer should
support automatic data quality
controls to accelerate data adjustment
and reconciliation, delivering approved
reports along timetables which are
acceptable to the business.
The reporting capability should be
able to provide internal and external
regulatory reports in a seamless
fashion, especially since it is likely
that future regulatory requirements
will demand more information on how
Conclusion
The old stress testing approach with
its segregated view of risk, limited
scope and severity of scenarios and
incomplete organizational picture of
potential risk failed the tests of reality
as evidenced during the financial
crisis. Banks have recognized this and
are in the process of building a stress
testing environment which is useful
to their business and demonstrates
the potential impact of a prolonged
economic cycle. Banks need a stress
testing function which uses a new
governance model and provides an
integrated view of risk encompassing
all types of risk, including secondary
effects and liquidity risk. They need to
implement a stress testing platform
comprising existing risk applications
and workflow for the implementation
of scenario definition and execution.
The platform should also include a
sophisticated risk aggregation engine
to allow for the aggregation of risk at
multiple levels and across different
risk dimensions. Finally, banks need to
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report stress test results in different
ways, providing risk, financial and
qualitative information to help the
business make the right decisions.
If you would like to discuss how
Accenture can help you to enhance
your Stress Testing capabilities please
contact Peter Beardshaw at +44
20-7844-7550 or by email at peter.
[email protected].
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About the Authors
Peter Beardshaw
Peter Beardshaw is executive director
– Accenture Risk Management. Based
in London, Peter brings over 15 years
of deep experience in delivering target
operating models and business process
redesign initiatives within the credit
risk and capital management areas.
His broad experience in Investment
Banking program management and
change management, in addition to his
technical experience in multiple asset
classes across front, middle and back
office helps organizations become
high-performance businesses.
Takis Sironis
Takis Sironis is a senior manager –
Accenture Risk Management. Based
in London, Takis brings over 18 years
of deep experience in business and IT
transformation in the risk management
space for investment and retail
banking. His extensive knowledge and
technical skills in risk management
processes and methodologies and risk
technologies helps Takis drive and
implement risk programs, align risk
functions to business strategy and
bring to market new operating models
and risk architectures. With his current
focus on Capital Optimization, Stress
Testing and Risk Transformation, Takis
guides organizations on their journey
to high performance.
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About Accenture Risk
Management
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High Performance Delivered
are trademarks of Accenture.
ACC11-0452 / 11-2853
Accenture Risk Management
consulting services work with clients
to create and implement integrated
risk management capabilities designed
to gain higher economic returns,
improve shareholder value and increase
stakeholder confidence.
About Accenture
Management Consulting
Accenture is a leading provider of
management consulting services
worldwide. Drawing on the extensive
experience of its 13,000 management
consultants globally, Accenture
Management Consulting helps clients
move from issue to outcome, with
pace, certainty and strategic agility. We
enable companies and governments to
achieve high performance by combining
broad and deep industry and functional
offerings and capabilities across seven
service lines: Customer Relationship
Management, Finance & Performance
Management, Process & Innovation
Performance, Risk Management, Talent
& Organization Performance, Strategy,
and Supply Chain Management.
About Accenture
Accenture is a global management
consulting, technology services
and outsourcing company, with
approximately 211,000 people serving
clients in more than 120 countries.
Combining unparalleled experience,
comprehensive capabilities across all
industries and business functions,
and extensive research on the world’s
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. The company
generated net revenues of US$21.6
billion for the fiscal year ended
Aug. 31, 2010. Its home page is
www.accenture.com.