
WEF backs calls for reverse stress tests
Speaking at the launch in London, Oliver Wyman chief executive John Drzik, who helped write the report, said: "There needs to be a focus on risks which can kill the organisation. Several organisations have already set up "black swan committees" to focus on these."
Reverse stress tests, which start by outlining an outcome that would threaten the company and go on to determine what scenario would produce such an outcome, have been recommended by regulators including the UK Financial Services Authority.
Drzik echoed criticisms from several regulators that risk management had been treated as a side issue rather than one deserving of constant management attention. Also, "model builders tend to focus on areas where there is a large amount of historical data, which means they underfocus on low-frequency high-impact risks... There's not enough emphasis on stress testing and quantitative models".
See also: Asset price crashes could continue this year, says World Economic Forum
Stress tests were ignored in lead-up to crisis, Basel risk head says
BIS releases roadmap to better stress testing
FSA plans reverse stress tests
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
SEC expected to protect CRT in conflicts of interest rule
Decision could come as early as today; high hopes for credit risk transfer exemption
FRTB managers face hard facts about risk factors
There are ways to reduce the capital charges caused by NMRFs, but they come at a price
SEC official defends delayed dealer registration rule
Regulator says market should be treated like equities, but PTFs warn it will harm market liquidity
New UK clearing rules: same as the old rules?
Clearing experts doubt UK regulation can diverge significantly from Emir and global standards
SEC to delay US Treasury clearing mandate, dealer rule
A final vote on proposed US Treasury market reforms is now expected in early 2024
BoE warns against use of stablecoins in banking
Tokenised payment systems pose compliance and systemic risks, regulator says
Industry unsure of SEC’s new short-selling transparency rule
Requirement aims to provide sufficient transparency while protecting traders from a GameStop-style backlash
EC to adopt NII outlier test within ‘weeks’
New IRRBB rules could come into force in early 2024; industry hoping EBA draft is softened