Risk Structures Flashcards
(2 cards)
1
Q
What is stress-testing?
A
Stress-testing is the process of carrying out an assessment by modelling a series of hypothetical circumstances to evaluate the company’s ability to withstand unexpected events or shocks
2
Q
Why and how should stress testing be used as part of a company’s risk assessment process?
A
It should be used to identify the company’s principle risks. It can aid in identifying the probability of an occurrence and the size of the impact
It can help assess the potential worst case impact of particular events and the effectiveness of the measures in place to reduce and manage the risk
