Meet the Challenges of Enterprise Stress Testing with the SAS Solution for Stress Testing

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The purpose of this blog is to introduce the concept of Stress Testing and why it is important to perform for institutions such as banks. Stress Testing is a computer-simulated technique that is used to test the resilience of an institution and investment portfolios to see how they fare in drastic economic or financial scenarios. Stress Testing is crucial for an institution to perform because it helps gauge investment risk and the adequacy of the institution’s assets as well as evaluate internal processes. This process will then allow the institution to develop strategies necessary to mitigate against any possible losses.

There are regulations in place that require banks to carry out various stress-test scenarios and report on their internal procedures for managing capital and risk. Banks continue to face new regulatory, internal, and market challenges. SAS provides a solution that banks can use to carry out the required stress testing procedures and address the persistent challenges they experience.

SAS Solution for Stress Testing

SAS Solution for Stress Testing is a user-friendly, web-based solution that enables the user to perform stress testing activities and facilitates the capture and management of stress testing-related information. The solution provides the user an opportunity to simulate their business in a simple way while offering a comprehensive (covering all risk types), detailed, fast, and flexible environment.

SAS Solution for Stress Testing contains built-in workflows and user interfaces that can be easily customized by business users to meet the specific needs of their organization. The solution allows users to centrally orchestrate the entire stress testing process and foster collaboration across the organization. The solution also provides powerful, built-in dashboarding and reporting capabilities using SAS Visual Analytics, which is a component of the solution.

The Stress Testing Process Flow using SAS Solution for Stress Testing

SAS Solution for Stress Testing acknowledges that there are different types of stress tests that fall under the primary categories of regulatory stress tests (imposed by regulatory agencies) and business-as-usual stress tests (self-imposed internal stress tests). Therefore, the solution follows practices and approaches for different regulatory stress testing frameworks and offers financial institutions a tailored user interface (UI) for these different frameworks: Enterprise-Wide Stress Testing (EWST), Internal Capital Adequacy Assessment Process (ICAAP), and Comprehensive Capital Analysis and Review (CCAR).

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For any of the above stress testing frameworks, SAS Solution for Stress Testing offers menu-driven dashboards that make it easy to manage multiple stress tests, incorporate a range of scenarios and portfolio assumptions, and execute the stress tests quickly. One great feature of this menu-driven dashboard is the workflow which can be used to define tasks in the cycle for a specific base date (or time period), coordinate the participation of different users throughout the entire process, and generate reports to summarize the results of the workflow activities. The sample cycles that the solution offers are used to centralize access to data, models, and scenarios for a specific time period.

EWST Process Flow Example

The screen capture below shows an example workflow diagram for SAS Solution for Stress Testing: EWST. The workflow depicts the different stages associated with the stress testing cycle called the EWST Cycle.

For the cycle to be completed, it must be initiated, data must be prepared, assumptions must be configured, analysis must be performed and reviewed, adjustments and allocations must be made, and the cycle must be signed-off.

The customizable feature of the solution allows users to customize or tailor the workflow to meet their organization’s specific business structure and process management needs.

To Learn More

This is just one of the many different aspects of the SAS Solution for Stress Testing. To learn more about SAS Solution for Stress Testing, visit the e-course available through the SAS Learning Subscription: Course: SAS® Solution for Stress Testing: Solution Overview