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These issues with risk management in practise demonstrate how complex a system risk management is. When used correctly, it has the potential to be a highly powerful instrument, but risk managers and management should be mindful of the possibility of failure. Companies should perform stress tests and scenario analysis in addition to employing quantitative tools like VaR to provide a more complete and informed risk assessment. In a stress test, the financial positions of the organization are exposed to drastic changes in important variables. In order to represent the interactions inside and across markets, scenario analysis models a variety of events (such as changes in exchange rates, interest rates, and commodity and asset prices).
