88. As part of their business planning and risk management, institutions should use reverse stress …

As part of their business planning and risk management, institutions should use reverse stress testing to understand the viability and sustainability of their business models and strategies, as well as to identify circumstances where they might be failing or likely to fail within the meaning of Article 32 of Directive 2014/59/EU. It is important that institutions identify indicators that provide alerts when a scenario turns into reality. To that end, institutions should:

• a) identify the pre-defined outcome to be tested (e.g. of a business model becoming unviable);
• b) identify possible adverse circumstances that would expose them to severe vulnerabilities and cause the pre-defined outcome;
• c) assess (depending on the institution’s size, as well as the nature, scale, complexity and riskiness of its business activities) the likelihood of events included in the scenarios leading to the pre-defined outcome; and
• d) adopt effective arrangements, processes, systems or other measures to prevent or mitigate identified risks and vulnerabilities.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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