Wolters Kluwer FS Offers Best Practice Guidelines for Stress Testing

Stress testing continues to play a more prominent role in financial organisations’ risk management efforts across the globe says Wolters Kluwer Financial Services, which has published a white paper on the topic.

The firm says that
‘Reinforcing Market Confidence with Consistent Stress Testing’
aims to help organisations apply an integrated, more strategic approach to their stress testing programmes.

In a recent commentary on the subject, Nancy Masschelein, vice president, market management, finance and financial risk at Wolters Kluwer FS, analysed the results from the recent
assessment conducted by the European Central Bank (ECB)
, where 20% of the 123 financial institutions (FIs) examined failed the stress test. She recommends that stress testing becomes a continuous exercise and a common risk practice.

In recent years, regulators and market observers alike have attributed significant losses, market turbulence and a general loss of confidence and trust to the inability of financial organisations to fully identify, measure and manage their risk exposure.

The white paper examines why and how FIs should apply a unified financial risk analysis for more consistent, transparent and integrated stress testing avoiding the inefficient and narrow viewpoint of silo based analysis.

“Knowing the very significant role that financial institutions play, it is critical to ensure that the financial system is capable of working efficiently not only under expected but also under unexpected, extreme conditions and been robust to absolve turbulence and losses; whereas having steady growth in profitability,” said Ioannis Akkizidis, global product manager, Wolters Kluwer FS. “Stress testing helps organisations measure this capability.

“This white paper examines how certain risk factors within an organisation frequently intersect with each other, making it imperative to consider these integrations when designing effective and meaningful stress testing scenarios.”

Further details on the white paper may be accessed
here
.

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