Stress test and RAF Limits

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    Stress test and RAF Limits

    The modern Risk Manager must orient himself towards adequate stress tests and scenario analysis in order to assess and identify the impact of adverse operational events on his profitability and own funds, taking into account the potential failure of internal controls and mitigation techniques.

     

    An analytical activity of this kind presupposes essential times and instruments for its concrete performance which, however, may not always be available.

    RS provides a powerful suite of analytical capabilities that allow you to easily perform simulations taking into account the historical series offered by LDC.

     

    More specifically, the tool helps the Risk Manager to perform real Stress Test sessions able to indicate to a specific configurable VAR (for example the 99.9° VAR) the potential risk deriving from simulations performed on the LDC.

     

    In a similar way, risk appetite calculation functionalities (RAF) are made available, in order to facilitate the definition of risk objectives and related tolerance thresholds. The tool helps to calculate the Risk Capacity (maximum risk assumed), the Risk Limits, the Risk Profile (actual risk), the Risk Appetite (target and risk appetite) and finally the Risk Tolerance (maximum tolerance threshold).

     

    All the analysis activities are highly configurable and offer a level of documentability such as to make each simulation reconstructible in retrospect.