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## Stress testing 

Stress testing is an important component of the Firm’s country risk management framework, which aims to estimate and limit losses arising from a country crisis by measuring the impact of adverse asset price movements to a country based on market shocks combined with counterparty specific assumptions. Country Risk Management periodically designs and runs tailored stress scenarios to test vulnerabilities to individual countries or sets of countries in response to specific or potential market events, sector performance concerns, sovereign actions and geopolitical risks. These tailored stress results are used to inform potential risk reduction across the Firm, as necessary. 

## Risk reporting 

To enable effective risk management of country risk to the Firm, country exposure and stress are measured and reported weekly, and used by Country Risk Management to identify trends, and monitor high usages and breaches against limits. 

The following table presents the Firm’s top 20 exposures by country (excluding the U.S.) as of December 31, 2018,  and their comparative exposures as of December 31, 2017. The selection of countries represents the Firm’s largest total exposures by country, based on the Firm’s internal country risk management approach, and does not represent the Firm’s view of any actual or potentially adverse credit conditions. Country exposures may fluctuate from period to period due to client activity and market flows. 

As discussed on page 132, during the fourth quarter of 2018 the Firm refined its country exposure measurement approach to exclude capital invested in local entities. While this change did not have a material impact to country exposure, prior period amounts have been revised within the following table to conform with the current period presentation. 

## Top 20 country exposures (excluding the U.S.) (a) 

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(a) Country exposures presented in the table reflect 87 %  and 86% of total firmwide non-U.S. exposure, where exposure is attributed to a specific country, for the periods ending December 31, 2018 and 2017, respectively. (b) Lending and deposits includes loans and accrued interest receivable (net of 

eligible collateral and the allowance for loan losses), deposits with banks (including central banks), acceptances, other monetary assets, issued letters of credit net of participations, and unused commitments to extend credit. Excludes intra-day and operating exposures, such as those from settlement and clearing activities. (c) Includes market-making inventory, AFS securities, and counterparty exposure 

on derivative and securities financings net of eligible collateral and hedging. (d) Includes single reference entity (“single-name”), index and other multiple 

reference entity transactions for which one or more of the underlying reference entities is in a country listed in the above table. (e) Predominantly includes physical commodity inventory. 

(f) 

The country rankings presented in the table as of December 31, 2017, are based on the country rankings of the corresponding exposures at December 31, 2018, not actual rankings of such exposures at December 31, 2017. 

