Don't wait for stress tests

Don’t wait for stress tests

When you read the phrase “stress test”, what thoughts pop into your head? I’ll go ahead and assume that they aren’t very positive. Most people think that banks and businesses only undergo stress testing when they are on the brink of disaster, but stress test shouldn’t be a last resort of your financial plan. Stress testing your business investment keeps you competitive by allowing you to be proactive.

The economy has changed the way we do business and the speed in which we need to adapt. Stress test can be used as financial indicators that allow you to prepare for the worst-case scenarios that your business can come across. It helps to cover the “what ifs” of running a business:

  • “What if” our biggest customer goes out of business?
  • “What if” customers start demanding lower prices? Can you meet them?
  • “What if” customers start taking longer to pay you?
  • “What if” sales or production levels drop?

Stress testing your business has its benefits. It allows your business to be more adaptable to changes by providing the financial data you need to make quick and accurate changes to your business. Stress tests also help you formulate plans that address the “what ifs” giving you leverage when dealing with stakeholders and bankers, not to mention making you a stronger competitor.

About the author: Antony Firth