Basel committee has highlighted the fact that stress tests done by financial institutions have highly underestimated the loss numbers under stressed situations. The actual loss numbers even for the expected stress are far higher than what their stress tests had revealed.

BrainMatics’ stress testing solution goes beyond the realms of traditional scenario analysis and provides a key risk management tool integrating the quantitative and qualitative assessment of losses in plausible and extreme conditions.

BrainMatics’ proprietary stress testing framework uses a risk factor model as a basis of relating portfolio performance to market and macroeconomic conditions. The framework entails macroeconomic factors, industry and market related factors and exposure specific factors. It also accounts for correlated tail exposures and risk concentrations across the business.