New Stress-Testing Scenarios For 2020

Duration 90 Mins
Level Intermediate
Webinar ID IQW20D0403

  • Regulatory requirements for stress-testing
  • Managerial a necessity for stress-testing
  • The common wrong choices of scenarios
  • Sources for scenarios
  • Discarding and evaluating scenarios
  • Review of a few new scenarios

Overview of the webinar

Provided scenarios are not hinted or even provided by a regulator, regulated financial institutions have to find relevant and up-to-date scenarios. Unregulated firms, if there are, also have to find stress-test scenarios that are of use for strategic management. When a generalized crisis happens, the resilient firms are the ones that have prepared for the closer scenarios to the one actually happening.

It is therefore critical to update the set of scenarios to the societal tensions building all around, and to detect areas of potential crises well before their occurrences.

We explain here a few methods to boldly explore the nastiest versions of what fate can bring, select them appropriately and without complacency, to produce a set of scenarios that can be as useful as practicable to an institution, in two ways: not only for better preparing for the next crisis, but also more generally to boost an institution resilience and flexibility. 

We do not spare the pitfalls, often seen in more reputable banks: past success will inevitably build a sense of invincibility, which often shows up in the failure of the scenario building process.

 Building an up-to-date set of scenarios is as critical as updating a strategic plan as things unfold. Although the stress-test process is a heavy one, it must be updated at least as quickly as bad news pop up.

Who should attend?

  • Risk Methodology
  • Credit risk, counterparty Risk
  • Market Risk Management and Analytics
  • Risk of Internal Audit — Quantitative Analysis
  • Regulatory and Economic Capital
  • Basel III
  • Regulation & Compliance
  • Operational Units Managers
  • Financial Institutions Advisory
  • Bank Supervision and regulation

Why should you attend?

Stress-testing, as practiced in most institutions much too often fail on the choice of scenarios to investigate. Scenario selection reveals to be such politically and emotionally taxing that, one a set of scenarios is compromised upon, the list will stay put for long, regardless of how much the world moves around. Hence, from inside an institution, it is quite a challenge, whilst steering away from blasphemy, covert critique and generally politically incorrect statement, to find scenarios go beyond merely ticking boxes and really stress-test the institution.

Using our recipes for selection scenarios, we propose a set of scenarios that, we love to hope, will not happen in 2020. However, the potential impacts of these plausible scenarios, in their envisioned form or as variations, can be anywhere between nasty and devastating. Better be prepared.

Faculty - Mr.Fred Vacelet

Fred Vacelet is a Financial Risk Management Consultant with international expertise in Risk Management methodological frameworks. His experience spans some 20 years, advising banks, software houses and others on risk management. Fred holds various degrees, including from London Business School, with post-graduate studies at the Technische (then West)-Berlin and Keio (Japan) universities. A qualified Islamic Finance person (IFQ), he is a magazine author on risk management and Basel Accords, and a regular speaker at conferences.
The client list includes ABN Amro, Barclays, CDC Paris, Credit Suisse, DePfa, Deutsche Bank, a few City hedge funds, IBM Consulting (Banking and Finance), Sungard, Lloyds TSB, National Bank of Egypt, the UK Regulatory body (now PRA), Reuters, and numerous other institutions of various countries and sizes. Fred runs training courses and workshops with participants from various banks around the world.

04-02-2020 - New Stress-Testing Scenarios For 2020.pdf


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