Furthermore, it should be possible to communicate this evaluation in a concise but comprehensive way to all stakeholders in the institution. In order to achieve this, a comprehensive risk evaluation toolbox needs to be put in place. This toolbox should comprise of a suite of complementary statistical risk models and a comprehensive stress testing programme.
First let me highlight some considerations regarding the statistical risk models before turning my attention to the concept of stress-testing. A toolbox of complementary statistical risk models We use statistical risk measures such as value-at-risk, expected loss or expected shortfall to assess the risk facing an institution.