Regulators in the US, UK, and EU have raised expectations for stress testing among banks, now requiring that these results be actively used in risk management, capital planning, and strategic decision-making. This change, driven by lessons learned from past financial crises and the emergence of new risks, positions stress testing as a fundamental element in demonstrating an institution’s resilience, rather than merely a regulatory formality. The emphasis is on incorporating stress testing into daily decision-making processes, enhancing governance, and ensuring that the approach is transparent and adaptable to evolving conditions.
The challenge
A Tier 1 global bank initiated a transformation project aimed at improving its enterprise-wide stress testing and strategic planning processes. The existing reporting methods were fragmented, manual, and primarily focused on compliance, which constrained the bank's ability to facilitate forward-looking, risk-informed decision-making. To address these challenges, the bank needed a modern reporting solution that would provide real-time insights, enhance scenario analysis, and align its risk appetite with business planning. Capco partnered with the bank to modernise its stress testing reporting capability, embedding real-time risk metrics into business planning, and enabling scenario-led decision-making aligned to strategic objectives.
Our approach
Capco collaborated with the client to create and modernise stress testing reporting environment using an agile, sprint-based approach. This program involved close collaboration with stakeholders from Risk, Finance, and Treasury. The initiative followed a structured, phased approach to deliver early value and develop a capability ready for the future.
- Launched with discovery: Conducted a multi-week discovery phase to assess the current-state reporting environment, technology landscape and pain points.
- Defined the target state: Developed a future-state vision for stress test reporting that aligned to strategic planning and dynamic risk appetite integration.
- Built a delivery roadmap: Created a prioritised roadmap of requirements covering regulatory, internal, and strategic stress testing use cases.
- Automated data workflows: Designed and implemented Alteryx pipelines to enhance repeatability, data quality and auditability.
- Developed executive dashboards: Built Power BI dashboards to visualise scenario impacts in real-time, integrated with the bank’s AWS infrastructure.
- Embedded scalable governance: Established a governance model with clearly defined ownership, controls, and process integrity.
- Enabled business adoption: Provided training, workflow documentation and support for a smooth transition to business-as-usual operations and long-term sustainability.
Value delivered
A strong, data-driven stress testing capability now supports the bank’s strategic planning process, with insights into risk appetite integrated from the beginning. The benefits to the bank include:
- Strategic decision-making enabled: Delivered real-time dashboards integrating risk appetite into stress test analysis and planning.
- Efficiency through automation: Automated Alteryx workflows cut manual touchpoints by 65%, and reduce the regulatory reporting cycle time.
- Governance uplifted: Defined and implemented a robust governance model across the reporting and stress testing lifecycle.
- Sustainable capability handed over: Equipped internal teams through training and documentation to maintain and extend the solution.
- Future-ready foundation: The bank is well-positioned to meet evolving regulatory demands and more sophisticated scenario design requirements.