systemic risk assessment

Systemic risk assessment involves analyzing how interconnected financial institutions and markets are, to identify potential chain reactions that could threaten the entire economy. It examines vulnerabilities that, if triggered—like a major bank failure—could spread widespread financial instability or collapse. The goal is to understand these risks early, so regulators and institutions can take proactive measures to prevent or mitigate large-scale economic disruptions. Essentially, it’s a comprehensive evaluation of what could go wrong in the financial system and how to strengthen it against such threats.