What is Stress Testing

In this chapter, the authors address a very real issue of current business life, and that is the prediction and prevention of corporate and municipal insolvencies and bankruptcies. The concept of stress testing banks for capital sufficiency under conditions of plausible risks is by now an accepted governmental mandate. Stress testing corporations and municipalities however is relatively new. The authors present a process for both corporate and municipal stress testing together with a review of legal considerations. Over time, it is expected that stress testing corporations and municipalities will become as routine as an annual visit to the family physician. This chapter is designed to establish the ground work for stress testing corporations and municipalities, including supply chains and not-for-profit organizations. This discussion applies equally well to global supply chains.