Next Wednesday and Thursday, June 13 and 14, Phil Chamberlain, EVP of Risk and Data Governance, and Andy Spero will present sessions at Risk.net’s two-day course in New York City, Stress Testing: CCAR & DFAST.
On Wednesday, Phil will present “Risk Appetite and Scenario Design in Stress Testing.” He will explain how a board’s risk appetite statement should include both qualitative aspects and quantitative measures of acceptable risks. Those quantitative measures can include stress test results across different situations or increasing severities of the same, basic scenario, e.g., a recession and a depression. Phil will explain how current risk profiles can be estimated as the forecasted losses in–or other implications of–these scenarios. Thus, stress test analyses are practical, transparent and effective ways to communicate a firm’s risks to its directors, particularly its strategic risks, which are associated with large or catastrophic losses.
On Thursday, Andy will present two sessions: “Beyond Regulatory (D.F.A.) S.tress T.esting” and “Integrating CECL with Stress Testing, or not.” In the first session, he will describe the non-DFAST (non-statutory) regulatory requirements of SR 12-7, which–to a certain extent–have been ignored for the past six years. In addition, he will describe the naturalness of stress testing for decision-making, the several benefits of it for effective risk management, and common stress testing mistakes observed in the industry.
In the second session, “Integrating CECL with Stress Testing, or not,” Andy will describe the similarities and differences between CECL and regulatory stress testing, i.e., CCAR/DFAST, as well as describe the closest that estimates from the the two approaches can possibly be. He will also question whether CECL and stress test results should, in fact, be comparable–given their very different purposes. Lastly, he will explain that regardless of those differences, their development approaches should be similar and equally rigorous and comprehensive.
If you are attending, we look forward to meeting you next week.