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Next-Gen Stress Testing for Dynamic Risk Management in Banks

 

Monalisa Wardhan

Functional Consultant, Industry Advisory Group, Banking, Financial Services, and Insurance, TCS

Nishant Kumar

Consulting Partner, Industry Advisory Group, Banking, Financial Services, and Insurance, TCS

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Automating stress testing – the path to real-time risk management in banks

In the aftermath of the 2008 financial crisis, regulatory agencies prescribed stringent stress tests to accurately assess the ability of banks to manage emerging stress scenarios. Although banks perform stress tests periodically , they mostly use traditional risk practices that fail to consider real-time events, which may be indicative of significant risk build-up. Timely alerts of such risk build-up are the need of the hour to ensure banks have the time to initiate measures to protect themselves and prevent losses.

Stress test automation in banking is the way forward. An intelligent stress testing platform in banks can enable event-driven stress testing to assess risk build-up and measure the consequent impact on the portfolios of banks. Automating stress testing at banks delivers multiple benefits:

  • Timely visibility into risk

  • Efficient, cost-effective, and dynamic stress testing

  • Real-time risk management

  • Improved business decisions

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