A Risk Stress Test

Known globally as The Risk Doctor, David has been working in risk management for about 30 years. He has worked in 48 countries on every continent except the Antarctic (too cold!), with clients in most industries.

  Risk Management   ProjectsAtWork  

Can the practice of stress testing improve the way we manage risk on our projects and programs? Yes, and here are two ways we can use this important approach, from identification of risk to organizational readiness.

Stress testing originated in engineering to check that structures such as bridges, roads, tunnels and buildings would carry the expected load without collapsing. It was usually performed as a desktop exercise, modifying design parameters to simulate what might happen if extreme or unplanned conditions occurred. From these beginnings, stress testing has spread to other areas.

In the world of software and hardware development, the stress test involves pushing systems beyond the limits of their normal operational capacity, and the discipline of reliability engineering has developed to specialise in this type of analysis.

More recently, stress testing has been used in the financial sector, with governments and regulators checking that banks and other financial institutions have sufficient capital reserves to cope with sudden and severe changes in the market.

Specifically in the risk field, the concept of stress testing also forms part of business continuity and disaster recovery, where business continuity plans are tested in advance to ensure that they will work if a real disaster arises. Realistic scenarios are played out as if they were actually …

Please log in or sign up below to read the rest of the article.