SPONSORS

SPONSORS

Risk Doctor Briefing: Stress Testing for Risk Management

SERIES ARTICLE

Dr David Hillson, PMI Fellow, HonFAPM, FIRM

The Risk Doctor Partnership

UK
________________________________________________________________________

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 happening, and weaknesses in planned responses are exposed and corrected.

Can stress testing help more generally in improving the way we manage risk? There are two ways we can use this important approach:

  1. Stress test our identification of risks. We need to know whether our process for identifying real risks is robust enough to find any uncertainty that might affect achievement of our objectives. If we don’t see a risk, we cannot manage it.

More…

To read entire article (click here)

About the Author

Dr. David HillsonDr. David Hillson flag-uk

The Risk Doctor

Dr David Hillson CMgr FRSA FIRM FCMI HonFAPM PMI-Fellow is The Risk Doctor (www.risk-doctor.com).  As an international risk consultant, David is recognised as a leading thinker and expert practitioner in risk management. He consults, writes and speaks widely on the topic and he has made several innovative contributions to the field. David’s motto is “Understand profoundly so you can explain simply”, ensuring that his work represents both sound thinking and practical application.

David Hillson has over 25 years’ experience in risk consulting and he has worked in more than 40 countries, providing support to clients in every major industry sector, including construction, mining, telecommunications, pharmaceutical, financial services, transport, fast-moving consumer goods, energy, IT, defence and government. David’s input includes strategic direction to organisations facing major risk challenges, as well as tactical advice on achieving value and competitive advantage from effectively managing risk.

David’s contributions to the risk discipline over many years have been recognised by a range of awards, including “Risk Personality of the Year” in 2010-11. He received both the PMI Fellow award and the PMI Distinguished Contribution Award from the Project Management Institute (PMI®) for his work in developing risk management. He is also an Honorary Fellow of the UK Association for Project Management (APM), where he has actively led risk developments for nearly 20 years.  David Hillson is an active Fellow of the Institute of Risk Management (IRM), and he was elected a Fellow of the Royal Society of Arts (RSA) to contribute to its Risk Commission. He is also a Chartered Fellow of the Chartered Management Institute (CMI) and a Member of the Institute of Directors (IOD).

Dr Hillson can be contacted at [email protected].

To see other works previously published in the PM World Journal by Dr David Hillson, visit his author showcase at http://pmworldlibrary.net/authors/dr-david-hillson/