Stress test?  Why?  Those things will never happen!

One of the issues relating to stress testing an organisation is that often the first reaction is that these scenarios are not likely to occur.

To a certain extent that may be the case but that is exactlywhy it is important to be as realistic as possible with the scenarios and also why it is important to be able to recognise and monitor potential trends.

For example, a 20% decrease in registration fees or donations may not occur over night but may occur at approximately 2% per month.

By the end of the year a 20% decrease has occurred and this negative trend may continue.  Recognising the start of the trend in the first or second month allows you to plan and manage the potential impact both in the short and long term.

Often the focus of stress testing relates to income elements, but managing expenses in a more effective manner can also be a good strategy as part of your stress testing.

For example, when was the last time the expenditure was reviewed and analysed.  Are there items of expenditure that simply don’t need to occur, could they be deferred, can bulk purchases be made or can a different supplier be used that results in significant savings?

If you have contracts for the supply of goods or services can they be changed either by not occurring as regularly or by negotiating a different service package?

If you have loans or credit cards have you considered renegotiating a better arrangement with your finance provider?  Most banks offer support and packages specially tailored to not for profit and community based sector and often can be flexible with financial arrangements.  If not consider changed banks.

Again, the main issue with stress testing that these points highlight is that if you take an active approach, identify possible trends and review your contractual arrangements, then there are potential opportunities that can be implemented that will help to minimise the impact if an adverse event was to occur.