Process improvement: The key to stress testing success

Process improvement: The key to stress testing success
March 5, 2015

Are you ready for your quarterly stress testing physical?

According to the 2014 EU-wide stress test report, 24 banks failed their recent stress testing exercises. These failures make a compelling argument that the act of examining the CCAR and stress testing processes in the United States could be lacking. By only aiming for compliance, companies could end up treating the monitoring process as a final exam that is passed or failed—focusing on procedure and policy, rather than an incremental process that could use continuous improvement.

Integrate processes
In order to combat changing regulations and to comply, organizations need to focus on developing an operating model that allows them to integrate CCAR and DFAST processes into the existing capital planning, forecasting, and risk management processes. Making this process a catalyst for long-term success requires stress testing results and scenarios to be part of day-to-day business decisions.

Transforming workflows to include results, scenarios, and processes will require buy-in from the top. Senior management needs to be involved in driving and implementing a strong end-to-end governance framework across the organization. However, simply assuming the ability to improve processes requires upper management oversight and leaves the door open for organizations to fall into a check-the-box routine with CCAR or DFAST processes.

Be proactive
Leading companies are taking proactive approaches to stress testing. They have implemented best practices for monitoring their processes in the middle of their workflows.

When examining processes becomes part of an organization’s culture, issues are more likely to be identified before they become systematic. In addition, teams are able to implement new insights on a regular basis, rather than waiting for an official change initiative.

— Constantine Kokolis, Solutions Architect at Workiva, Process Improvement: A Universal Framework for Effecting Change

A proactive approach should be taken to integrate the flow of data and to build a strong governance, risk, and control framework. Through incremental and continuous improvements to the existing capital planning, forecasting, and risk management processes, companies ensure their long-term success.

Check out this white paper to see the framework hundreds of companies have implemented to take control of improving their daily processes.

Mike Sellberg

About the author

Mike Sellberg is Executive Vice President and Chief Product Officer at Workiva. He is the former EVP and CTO at iMed Studios and the former Divisional General Manager at Engineering Animation, Inc.