CIMA P1 Syllabus D. Dealing With Risk And Uncertainty - Stress Testing - Notes 6 / 6
Stress testing
is a form of deliberately intense testing used to determine the stability of a given system, critical infrastructure or entity.
is a computer-generated simulation technique
often used in the banking industry
is used to assess the impacts of ‘what if’ events on key financial measures.
can also be used in non-financial companies
aims to quantify the risks an organisation faces
Examples:
Cybersecurity attacks
Foreign exchange rate riskstress testing models are complex and are not easy to formulate
Example
The hospital carries out stress tests on a random sample of individuals.
These stress tests are designed to determine the probability of the individual catching a virus.
The cost of the test is $10 per test.
Details on the individuals tested are as follows:
Number of individuals | 100,000 |
Ratio of stress tests to individuals | 1 to 20 |
What will be the cost for stress tests per individual?
Solution
Total number of tests will be 5,000 (one for every 20 of the 100,000 accounts)
The total cost for tests charged will be = 5,000 x $10 = $50,000.
So on 100,000 individuals, this equates to $0.5 per individual ($50,000 / 100,000 = $0.5).
You are at the end of this paper