What we learned at Stress Testing USA 2014
Chris McMillan, Wdesk Project Manager, recently presented at the Stress Testing USA 2014 Congress hosted by the Center for Financial Professionals (CFP) in New York City, March 22–26.
After attending the conference, Chris reported that although quantitative models, data management, and capital adequacy were topics of discussion, "there was a heavy emphasis on the process companies use to get their numbers. Accurate numbers are just not enough."
He went on to explain, "Those involved in capital planning and stress testing work with quantitative models every day. It's not unusual for them to know the details of how and why that data is accurate. However, across all industries there is a growing drive to have this peace of mind shared on an enterprise level."
Professionals responsible for stress testing and CCAR reports are increasingly concerned with demonstrating integrity in the testing and data gathering process. This emphasis reflects the focus on process integrity that firms are encountering internally from management and externally from regulators.
To address this new emphasis, Chris advises to adopt a perspective that is attentive to the entire stress testing cycle, from the origination of the data through submission.
This begins by creating a solid policy that clearly defines all procedures related to the process. When the policy is accepted on an enterprise level, both the data and the procedure become auditable—allowing the integrity of the process to be demonstrated.
The most important thing CFP Stress Testing USA taught us is that "the notion of simply having the right numbers is no longer enough. It is equally important that firms are able to demonstrate and have confidence in how they arrived at those numbers," Chris explains.