Achieving banking resilience under compound shocks : Scenario analysis, management actions, and decision infrastructure
Abstract
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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Author's Biography
Dr. Nasir M. Ahmad is the Founder and Managing Partner of Basinghall Analytics, a UK-based company combining analytics, risk, and technology to build enterprise-grade platforms rooted in practical business and regulatory experience. He specialises in methodologies and platforms for enterprise stress testing, scenario analysis, model risk, artificial intelligence applications including retrieval-augmented generation with graphs (GraphRAG), recovery and resolution planning, capital and liquidity regulation, and climate risk analysis. Nasir’s previous roles include banking book quant at Royal Bank of Canada, trading book quant at Toronto Dominion Bank, Director at Arthur Andersen, Partner at Ernst & Young, and Managing Director at BlackRock. He works frequently with leading regulators. Nasir holds an MSc in theoretical physics and a PhD in mathematics from the Swiss Federal Institute of Technology in Lausanne.
Olga Balashova is a Quantitative Analyst at Basinghall Analytics, contributing to the modelling components of the company’s analytics platforms. Her expertise includes credit, climate, market, and liquidity risk analysis, model development and validation, stress testing, and derivative pricing. Olga has seven years’ experience in quantitative finance and holds an MSc in applied mathematics and computer science from the Faculty of System Analysis, Control and Information Processing, Tomsk State University, Russia.
Citation
Ahmad, Nasir M. and Balashova, Olga (2026, June 1). Achieving banking resilience under compound shocks : Scenario analysis, management actions, and decision infrastructure. In the Journal of Risk Management in Financial Institutions, Volume 19, Issue 3. https://doi.org/10.69554/XUCM3198.
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