Wolters Kluwer Offers Advice on Stress Testing

Wolters Kluwer has released a new paper to provide financial organizations with best practices for stress testing.

As stress testing continues to play a more prominent role in financial organizations’ risk management efforts across the globe, Wolters Kluwer Financial Services released a white paper on Monday, “Reinforcing Market Confidence with Consistent Stress Testing,” to help organizations apply an integrated, more strategic approach to their stress testing programs. 

In a November comment piece on the subject, Nancy Masschelein, vice president of market management, finance and financial risk at Wolters Kluwer Financial Services, analyzed the results from the recent assessment conducted by the European Central Bank where 20% of the 123 financial institutions examined failed the stress test. In the comment piece, Masschelein 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 organizations to fully identify, measure and manage their risk exposure. The white paper examines why and how financial institutions 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. Stress testing helps organizations measure this capability,” said Ioannis Akkizidis, global product manager at Wolters Kluwer Financial Services, in a statement. “This white paper examines how certain risk factors within an organization frequently intersect with each other, making it imperative to consider these integrations when designing effective and meaningful stress testing scenarios.”