GCRI · Mathematics, statistics and data
Spatial intelligenceObservations, models and their uncertainty in one view
Scenario design and stress testing
Scenario design and stress testing construct plausible, severe future conditions to examine how systems and institutions would perform. They complement probabilistic analysis where data are scarce or futures are deeply uncertain. Systemic Risk Management stewards this page for the Nexus Consortium.
Scenario design and stress testing on the record.
- 01InstitutionThe Global Centre for Risk and Innovation (GCRI)
- 02The methodWhat scenario design and stress testing covers
- 03Reference practiceScenario and stress testing follow supervisory and planning practice
- 04In systemic risk workSevere, plausible and combined
- 05Applied inPlatforms that apply this method
- 06StewardshipWho maintains this page
- 07SourcesWhere this page's references lead
What scenario design and stress testing covers.
- 01
Core methods
narrative scenario development; reverse stress testing; macro-financial stress testing; multi-hazard scenario construction; tabletop exercises; cascading impact mapping.
- 02
Data and instruments
historical analogues; model outputs; expert workshops; supervisory scenario frameworks; exposure and balance sheet data.
- 03
Validation
Scenarios are reviewed for plausibility, internal consistency and severity relative to history. Exercise outcomes are compared with actual events when they occur.
- 04
Limits
Scenario choice can reflect prevailing assumptions and miss novel combinations. Results depend on how participants and models represent responses.
- 05
Use in risk decisions
Stress tests reveal vulnerabilities that arise when several risks materialise together. They inform capital, contingency and coordination plans across sectors.
Scenario and stress testing follow supervisory and planning practice.
| Reference | What it sets |
|---|---|
| NGFS scenarios | Climate scenarios for financial analysis |
| Supervisory stress testing | Severe but plausible scenarios |
| Reverse stress testing | Scenarios that break a system |
Severe, plausible and combined.
Scenarios explore futures that cannot be assigned reliable probabilities. Systemic stress tests combine shocks across systems: a heat wave with a grid failure and a cyber incident. Reverse stress tests start from failure and ask what would cause it.
- Combine shocks across systems.
- Use reverse stress tests to find vulnerabilities.
- Do not present scenarios as forecasts.
- Applications on Risk Management.
Platforms that apply this method.
- Systemic Risk ManagementInstitutionGCRI
- Foresight NexusInstitutionGRF
- Asset Management NexusInstitutionGRA
- Private Equity NexusInstitutionGRA
- Institutional Funds NexusInstitutionGRA
- Financial StabilityInstitutionGRA
- Climate and Nature Financial RiskInstitutionGRA
- Public Finance and Sovereign DebtInstitutionGRA
- Private CreditInstitutionGRA
Who maintains this page.
Systemic Risk Management stewards scenario design and stress testing: it keeps this description current and reviews how the method is applied across the platforms.
Where this page's references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
Where this page leads across the Consortium.
- Scenario design and stress testingGCRIApplied in Systemic Risk Management.
- Scenario design and stress testing for foresightGRFApplied in Foresight Nexus.
- Scenario analysis for portfoliosGRAApplied in Asset Management Nexus.
- Stress testing private portfoliosGRAApplied in Private Equity Nexus.
- Stress testing institutional fundsGRAApplied in Institutional Funds Nexus.
- Scenario design and stress testing for financial stabilityGRAApplied in Financial Stability.
- Scenario design and stress testing for climate and nature financial riskGRAApplied in Climate and Nature Financial Risk.
- Scenario design and stress testing for public finance and sovereign debtGRAApplied in Public Finance and Sovereign Debt.
- Scenario design and stress testing for private creditGRAApplied in Private Credit.
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The same subject across the Consortium.
- GRFglobalriskforum.comScenario design and stress testing for foresightMandates, commitments and accountability
- GRAglobalriskalliance.comScenario design and stress testing for financial stabilityExposure, loss and capital
- Nexus Standardsnexustandards.comScenarios, models and foresightStandards that apply
- Risk Academyrisksacademy.comScenario analysis and stress testingWhere it is taught
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