There is a limited set of consistent scenarios for the possible evolution of key risk drivers such as changes in economic indicators, exchange rates, interest rates, default rates or equity prices. Scenario analysis is the foundation of a robust process for planning under uncertainty and prompts an institution to validate the optimal risk position in all circumstances. By examining the possible evolution of key risk factors, there are some corresponding actions that can be taken:

• Proactive moves - determination to maintain an acceptable risk-return in operation like an exit from a fundamentally unattractive business line or reduction in wasted liquidity and/or capital due to inefficient processes and approaches;

• Hedging against the adverse outcome – no need to exit immediately from all positions but investment in increased flexibility to move proactively; and

• Trigger-based moves – detection from early-warning signals once some predetermined events arise like shift to long-term funding even at high cost if deteriorating ratings reduce readiness to lend to counterparties.

CT RISK will help financial institutions and corporations to evaluate the appropriate range of uncertainty in designing scenarios, identify key risk factors, estimate the possible course of their evolution and develop early-warning tool to track emerging risks.