Explanation

Reverse stress tests are used by institutions for both reasons:

I. To test events that threaten the viability of the institution - This is correct. Reverse stress testing starts with identifying a specific adverse outcome (such as bankruptcy or severe capital depletion) and then works backward to determine what scenarios could lead to that outcome.

II. To assess where multiple risks occur simultaneously - This is also correct. Reverse stress testing is particularly valuable for identifying scenarios where multiple risk factors interact simultaneously, which might not be captured in traditional forward-looking stress tests.

Reverse stress testing differs from traditional stress testing in that it:

• Starts with a predefined adverse outcome
• Works backward to identify scenarios that could cause that outcome
• Helps identify vulnerabilities and interdependencies between risks
• Is particularly useful for identifying "tail risks" and systemic vulnerabilities

Therefore, both statements I and II are valid reasons why institutions use reverse stress tests.