Stress Testing and Scenario Analysis

Stress testing and scenario analysis are techniques used to evaluate how systems, such as financial institutions or companies, perform under extreme conditions. Stress testing assesses the effects of severe but plausible situations, like an economic downturn or a sudden market crash. Scenario analysis, on the other hand, involves examining various hypothetical situations to see how outcomes might change. Both methods help organizations understand vulnerabilities, prepare for potential risks, and implement strategies to strengthen resilience, ensuring they can withstand unexpected challenges in the future.