Risk Dynamics helps institutions to stay resilient with reliable stress-testing and balance-sheet management

We assist financial institutions in implementing fast, reliable regulatory stress tests, and we enable financial and non-financial clients to leverage their stress-testing tools for business and strategic purposes.

What do we do?

For both financial and non-financial clients, Risk Dynamics designs and implements methods, digital workflow, and data solutions for integrated balance-sheet and stress-testing approaches. We specifically focus on four areas:

  1. data and technology
  2. models and scenario simulation
  3. governance and organization, and
  4. stress-testing usage (the integration of stress testing as a core bank process, for example)
01. Stress_Testing_01-1
01. Stress_Testing_02 (1)

Our impact

Our work has enabled clients to maximize their investment in managerial and regulatory stress-testing. Over the years, we have collaborated closely with our clients to:

  • Build capabilities to reliably meet regulatory requirements
  • Create resilient, risk-aware organizations whose business lines and functions align on a commonly shared risk appetite
  • Assess risk appetite, financing, and hedging strategies for non-financial clients
  • Develop scalable, reliable data architecture and infrastructure for stress-testing

Case studies

  • Developing a regulatory stress-testing program for multiple risk types

    Risk Dynamics helped a leading global systemically important bank (GSIB) in the US to develop a regulatory stress-testing program. The program covered multiple risk types, such as consumer, wholesale, market, and operational risk. Specifically, we:

    • Designed and executed the overall program (until hand-off to the client) covering over 10 workstreams (charter, leadership, resource needs), overall governance, review and challenge forums, regulatory communications, and reporting
    • Developed a model landscape balancing efficiency and granularity to capture unique characteristics of multiple segments
    • Developed model development principles across model types
    • Developed over 50 models and reviewed over 50 additional models across workstreams
    • Formulated overlay and adjustment principles and created over 100 overlays
    • Developed an ongoing sustainability strategy across workstreams and for the overall program

  • Creating a managerial stress-testing concept for a new team

    For a leading, regional banking group in the Middle East, Risk Dynamics assisted in creating a managerial stress-testing concept. With the client’s newly created team, we developed key capabilities and put the required infrastructure into place.
    Our specific accomplishments for the team included:

    • Setting up a strong project team, including the core model team, an expert panel, and validators
    • Wrote detailed modelling principles for modelling handbooks
    • Managed data to address gaps and challenges
    • Jointly developed the first and second waves of models the team designed
    • Syndicated and integrated models into decision-making 
    To build up the team’s modelling capabilities, we offered expertise on the model-building process—translating macro-economic factors into risk drivers and instructing the team on statistical techniques as well as stakeholder and expert management. We also developed the team’s model validation capabilities by describing typical pitfalls and mitigation strategies.

Copyright © 2024 Risk Dynamics, a McKinsey company