Define the scenario before changing the model
This is a hypothetical stress test. State the move in rates, funding access, demand, currencies, or policy before selecting affected assets. Working backward from a desired output usually produces a vague scenario.
Record the sequence of effects
A shock may reach new orders first, then utilisation, margin, cash needs, and refinancing. Each link needs a likely delay and the operating response available to management.
Look for portfolio concentration and correlation
Adding asset-level losses is the first pass. Review whether common lenders, buyers, or exit windows can contract together.
- Direct operating effect.
- Capital structure and liquidity.
- Valuation and exit market.
- Second-order supplier or customer effect.
Precision does not remove scenario judgement
Decimal outputs do not make uncertain inputs more certain. I would retain the critical assumptions, sensitivity range, and paths that cannot be measured cleanly.