Organizations can learn from the banking industry’s use of stress testing to ensure they can respond to economic downturns.
In response to the global financial crisis of 2008, the U.S. government enacted regulatory reforms requiring banks to perform an in-depth review of the risks in their businesses. Among the regulations, banks had to conduct stress testing and scenario analysis each year. These tests involved performing a “what-if” analysis of how their balance sheets, net income, capital cushion, and other key financial metrics would evolve if an economic stress occurred.
