Stress testing: Enhancing financial resilience

Effective stress testing requires strong data infrastructure, alignment of models with strategic goals, and active involvement from senior management. By adopting these practices, institutions can improve resilience, decision-making, and maintain a competitive edge in a dynamic environment.

Stress testing is a critical tool for financial institutions to evaluate their resilience against various risks, such as geopolitical conflicts, climate change, and cyber threats. It involves simulating adverse scenarios to assess the impact on financial stability and operational health. The practice is increasingly important due to heightened regulatory requirements and the need for effective risk management.

Globally, stress testing is evolving with innovative approaches, focusing on understanding market dynamics and institutional behavior under stress. In Australia, regulatory bodies are aligning with international best practices to enhance the robustness of stress testing frameworks.

Articles in the series

Strengthening strategic decision making and resilience

With the increasing demand for enhanced stress testing capabilities on a global scale, strengthening stress testing frameworks is essential for institutions to maintain resilience and adaptability in an ever-changing environment.

Read more

Key considerations for banks and superannuation funds

The Australian Prudential Regulation Authority’s (APRA) upcoming system-wide stress test presents a significant opportunity for Australian banks and superannuation funds to put processes, policies and systems to the test. Learning from the outcomes of the Bank of England’s System-Wide Exploratory Scenario (BoE SWES) can provide useful insights to set participants up for a high quality process and outcome.

Read more

{{filterContent.facetedTitle}}

{{contentList.dataService.numberHits}} {{contentList.dataService.numberHits == 1 ? 'result' : 'results'}}
{{contentList.loadingText}}
Follow PwC Australia