DOI: 10.69554/xucm3198 ISSN: 1752-8895

Achieving banking resilience under compound shocks : Scenario analysis, management actions, and decision infrastructure

Nasir M. Ahmad, Olga Balashova
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Banks now operate in an environment in which many stresses interact rapidly and non-linearly. In such conditions, resilience cannot be assessed solely by capital strength or periodic stress testing. This paper argues that banking resilience should be understood hierarchically. The primary objective is outcome resilience: the ability of a bank to withstand a severe compound shock. Capability resilience — the ability to run, update, and govern integrated scenario analysis quickly — is a secondary objective. The paper develops a practical framework for both dimensions and uses a quantitative, stylised scenario to illustrate the approach. The framework also compares key prudential metrics before and after management actions. For European institutions, it can also support both short-term environmental stress testing and longer-term resilience analysis. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.

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