Based upon the known information at the time of writing this outline, it is clear that significant financial damage has happened, together with its cortege of societal and human tragic consequences. We concentrate here on the financial industry and on its stress-tests, assuming that damage limitation and disaster recovery are being implemented the right way by all other relevant professions.

The immediate reactions of financial institutions belong to operational risk management and include the restriction on physical contacts, working with fewer on-site staff.

It is also, the role of central banks, regulators, and supervisors to assess the  financial consequences of the pandemic on GDP, industrial and commercial processes, and more importantly credit risk, as the credit risk issues with outliving the virus.

 The next crisis that will strike the financial industry could be anything else than again a pandemic. Hence it is crucial to extrapolate the lesson from the pandemic episode into learning how an unprecedented crisis can tell us more about what to do when facing the next crisis, instead of coming up again with the same pattern of preparing for the last crisis and not the next one.

It is well known that financial institutions, faced with stress-testing exercises, will do the job thoroughly only if compelled by supervisors or if the scenario just happened for good. One of the reasons is that it is too easy to discard an unprecedented scenario as not plausible enough… until facing the scenario for good.

We are in a stage of damage limitation and disaster recovery, when risk appetite towards pandemics is at its lowest (yes, risk appetite, empirically, follows such a pattern; so much for rationality or consistency). It is the right time for the finance industry to review their stress-testing approaches in light of what has been recently happening.