Stress Testing : Why And How Might These Weaknesses Affect An Institution?

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Explain the purpose of Stress testing. Why and how might these weaknesses affect an institution?
Stress testing is well prevalent in the IT sector. It is basically used for testing the hardware and software capacity to perform under extreme conditions which can even reduce them to their breaking points. For hardware, it can include thermal load – stability under heat or elevated temperature or fluctuating voltage, memory used, stability of memory, processing speed, task type. The two major components, which are mainly tested, are Central Processing Unit and Memory. In case of CPUs, testing them for 24 hours at their 100 percent capacity is sufficient to determine its viability under extreme running condition and their maximum level of performance(Borioet al., 2014). Stress testing is used to check how it performs without cashing down or hanging up. This is most prevalent for institutes like banks, which has to do millions of transaction every day. Hence, lots of analysis – credit risk, liquidity risk and others including that of the financial health of the bank also needs to be assessed from time to time. The reports when adequately generated by properly tested soft wares gives a clear picture if the bank would be able to with stand and survive any major financial meltdown.
In case if the stress testing is not done properly and an IT infrastructure is being set up in an institute, following situations might come up,
• Crashing down of important softwares under running

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