Stress testing: the new must-have for financial resilience
Why has stress testing become a must-have?
LLC "EIFOS HUB" answers this question in its article.
Stress testing used to be considered a tool for large companies. Today, the situation has changed. Small and medium-sized businesses operate in the same unstable environment as corporations.
Firstly, cheap loans are no longer available. Banks have tightened their conditions, and interest rates remain high. A mistake in working capital management now not only reduces profits, it can jeopardise the entire business. Whereas in the era of cheap money it was possible to take out additional loans to cover cash flow gaps, today this option is virtually non-existent. A mistake in forecasting is not a 5% drop in profitability, but a matter of business survival.
Secondly, stress testing is gradually becoming the norm, and not just for the financial sector. When negotiating with funds or refinancing and investing, companies are increasingly required to present calculations for stress scenarios: a fall in demand or an increase in costs.
Thirdly, there are supply risks. In 2025, the rise in tariffs and duties coincided with the restructuring of raw material chains and the introduction of climate levies. Production costs change along with the market, and this requires flexible financial scenarios. For companies with a limited product range or those dependent on a narrow circle of suppliers, stress testing is a tool for predictability. Any delay of 6–8 weeks leads to a halt in sales and liquidity problems. Most trading and manufacturing companies depend (at best) on one or two supply chains.
LLC "EIFOS HUB" answers this question in its article.
Stress testing used to be considered a tool for large companies. Today, the situation has changed. Small and medium-sized businesses operate in the same unstable environment as corporations.
Firstly, cheap loans are no longer available. Banks have tightened their conditions, and interest rates remain high. A mistake in working capital management now not only reduces profits, it can jeopardise the entire business. Whereas in the era of cheap money it was possible to take out additional loans to cover cash flow gaps, today this option is virtually non-existent. A mistake in forecasting is not a 5% drop in profitability, but a matter of business survival.
Secondly, stress testing is gradually becoming the norm, and not just for the financial sector. When negotiating with funds or refinancing and investing, companies are increasingly required to present calculations for stress scenarios: a fall in demand or an increase in costs.
Thirdly, there are supply risks. In 2025, the rise in tariffs and duties coincided with the restructuring of raw material chains and the introduction of climate levies. Production costs change along with the market, and this requires flexible financial scenarios. For companies with a limited product range or those dependent on a narrow circle of suppliers, stress testing is a tool for predictability. Any delay of 6–8 weeks leads to a halt in sales and liquidity problems. Most trading and manufacturing companies depend (at best) on one or two supply chains.
How to conduct a stress test
Step 1. Make a list of vulnerabilities: revenue, margins, loans, supply chains, currency risks, energy dependence. A stress test is not a way to ‘reassure investors.’ More often than not, it is needed to honestly admit that the business will not survive.
Step 2. Three scenario models are used: baseline (normal conditions), adverse (moderately negative), severe (extreme). The scenarios are calculated using key financial models - income statement, cash flow statement and balance sheet structure. This allows you to see where the business is losing margin, when liquidity dries up, and how critical the debt burden is in different scenarios.
Typical parameters of adverse scenarios:
Step 1. Make a list of vulnerabilities: revenue, margins, loans, supply chains, currency risks, energy dependence. A stress test is not a way to ‘reassure investors.’ More often than not, it is needed to honestly admit that the business will not survive.
Step 2. Three scenario models are used: baseline (normal conditions), adverse (moderately negative), severe (extreme). The scenarios are calculated using key financial models - income statement, cash flow statement and balance sheet structure. This allows you to see where the business is losing margin, when liquidity dries up, and how critical the debt burden is in different scenarios.
Typical parameters of adverse scenarios:
- a 20–30% drop in revenue due to lower demand
- 25–40% increase in the cost of raw materials or energy
- 2–3 month disruption to supplies
- 2–3 p.p. increase in interest expenses on loans
- regulatory changes (ESG penalties, tax adjustments, new reports)
According to the European Central Bank, more than 40% of European companies will include stress scenarios in their annual planning by 2025. Stress testing has become a basic element of financial discipline, on a par with budgeting and auditing. The idea is simple: it is better to see in advance where a business might ‘break down’ than to discover this in a real crisis situation.
In essence, a stress test is a controlled simulation of a crisis that shows how key financial indicators will change in the event of adverse events. It is not an ‘average forecast’ but a test of maximum load to check where the business will ‘break down’.
Uncomfortable questions
What will happen to the company if demand falls not by 2% but by 20%? How many months, in that case, will the company be able to pay salaries, rent and interest on loans, and settle accounts with suppliers? What will happen if the cost price increases or a key customer leaves?
If a business does not ask itself these uncomfortable questions, it will still have to answer them - only later. And not to itself, but to investors, creditors, auditors, and M&A partners.
In essence, a stress test is a controlled simulation of a crisis that shows how key financial indicators will change in the event of adverse events. It is not an ‘average forecast’ but a test of maximum load to check where the business will ‘break down’.
Uncomfortable questions
What will happen to the company if demand falls not by 2% but by 20%? How many months, in that case, will the company be able to pay salaries, rent and interest on loans, and settle accounts with suppliers? What will happen if the cost price increases or a key customer leaves?
If a business does not ask itself these uncomfortable questions, it will still have to answer them - only later. And not to itself, but to investors, creditors, auditors, and M&A partners.
Step 3. Impact assessment
A stress test determines the break-even point, identifies weaknesses and allows for advance adjustments to the cost structure. As a result, key indicators are assessed: liquidity, debt burden, profitability, break-even point, and operational stability period. Companies adjust their cost structure, diversify their supply chains, review their credit policy, reallocate capital and, if necessary, sell assets.
What next?
Times of uncertainty require not forecasts, but readiness for them. With rising tariffs and supply chain congestion, it is becoming increasingly difficult to remain profitable. In 2026, stress testing will become as standard for business as auditing was in the 2000s. LLC "EIFOS HUB" models possible negative scenarios: falling demand, rising exchange rates, higher interest rates, supply disruptions or the departure of key customers - and assesses how these events will affect revenue, profit and liquidity. Once we have identified the weak points, we turn the stress test into a manageable plan by reassembling supply chains and rebuilding models.
A stress test determines the break-even point, identifies weaknesses and allows for advance adjustments to the cost structure. As a result, key indicators are assessed: liquidity, debt burden, profitability, break-even point, and operational stability period. Companies adjust their cost structure, diversify their supply chains, review their credit policy, reallocate capital and, if necessary, sell assets.
What next?
Times of uncertainty require not forecasts, but readiness for them. With rising tariffs and supply chain congestion, it is becoming increasingly difficult to remain profitable. In 2026, stress testing will become as standard for business as auditing was in the 2000s. LLC "EIFOS HUB" models possible negative scenarios: falling demand, rising exchange rates, higher interest rates, supply disruptions or the departure of key customers - and assesses how these events will affect revenue, profit and liquidity. Once we have identified the weak points, we turn the stress test into a manageable plan by reassembling supply chains and rebuilding models.
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