Financial Stress Testing Checklist

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Scenario Definition

Define scenarios involving economic downturns (e.g., recession, market crash).

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Economic Downturn Planning

Develop scenarios with significant interest rate changes (both increases and decreases).

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Interest Rate Changes Planning

Create scenarios involving credit events (e.g., defaults, downgrades).

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Credit Events Planning

Consider scenarios involving operational disruptions (e.g., supply chain disruptions, natural disasters).

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Operational Disruptions Planning

Develop combined scenarios that consider multiple simultaneous adverse events.

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Combined Scenarios Planning

Data and Assumptions

Gather relevant financial data (e.g., balance sheets, income statements, cash flow statements).

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Financial Data Preparation

Define key assumptions for each scenario (e.g., changes in sales volume, prices, costs).

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Key Assumptions Preparation

Ensure the accuracy and reliability of the data used in the stress tests.

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Data Quality Preparation

Stress Test Execution

Select appropriate stress testing models and methodologies.

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Model Selection Execution

Apply the defined scenarios and assumptions to the financial models.

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Parameter Setting Execution

Analyze the results of the stress tests and identify potential vulnerabilities.

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Output Analysis Analysis

Document the stress testing process, including scenarios, assumptions, and results.

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Documentation Documentation

Review and Action

Review the stress test results with relevant stakeholders.

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Review Results Review

Develop contingency plans to mitigate the impact of adverse scenarios.

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Develop Contingency Plans Action Planning

Regularly update and refine the stress testing framework and scenarios.

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Regular Updates Ongoing