An evaluation of a firm’s financial position under a severe but plausible scenario, to assist in decision making within the organization. The term usually is usually applied broadly, not just to the mechanics of applying specific individual tests, but also to the wider environment within which the tests are developed, evaluated and used within the decision-making process. Stress testing is used within firms’ risk governance and risk capital planning. Within non-financial risk (NFR), stress testing usually seeks to understand the impact of a change in a macro-environmental factor on a specific risk.

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