Model Risk Management
Driving the value in modelling
Model Risk Management for better business decision
Banks’ quantitative systems are complex and many stakeholders have to take decisions based on risk quantitative techniques. Access to trusted models is essential to effectively use enterprise data, considered a strategic asset for banks, and to drive better business results.
1/ Model risk scope extension
Banks need to develop more models in order to comply with parallel regulations, typically:
- IFRS9 Framework Implementation and Forward Looking Integration
- ECB Regular Stress Tests
Banks should consider Model Risks limits within Risk Appetite Framework.
2/ Model Lifecycle efficiency
- Faster model deployment
- Streamlined processes
- Centralised modelling infrastructure
3/ Strengthen model risk governance
Regulators want to have a core understanding of the way banks develop, document, use, monitor, set up and maintain inventories, validate and control models for credit, finance and marketing activities.
SSM, EBA, ECB to focus their regulatory efforts on Model Risk Management framework given the fact that models and data are considered strategic assets and must be managed as key inputs to risk assessment as well as to business decision making process.
Model Risk Management for stress testing in financial institutions
Banks are using stress testing results more and more to make strategic and business decisions. Understanding the capabilities of stress testing models, their limitations and the impact of model uncertainty on banks’ stress testing results are critical...
A New Risk Type?
A clearly defined MRM framework with a strong management insight on monitoring models and their risks will allow institutions to strengthen their decision making processes and improve their profitability.
- Organisation and Governance (MRM Organisational Design, Policy Development, MRM Program Design)
- Model Lifecycle Management (Model Inventory, Model Classification, MR Documentation, Model Follow-Up)
- Model Control Framework (Data Quality Review, Validation Approach, Model Independent Review, Model Control Process Optimization)
- Model Risk Quantification (Practice Development, Model Risk Analytics, Model Risk Mitigation)
- Model Risk Management Processes & Technology (Platform Design, Platform Selection, Data Quality Management)
Model Risk Assessment Conference
April 10, 2017
Main topics covered during the round table:
- State of the art of the MRM
- MRM framework implementation is only beginning
- Non-regulatory models should be integrated in MRM frameworks
- Model attestation: a new aspect of MRM proces
- The model development environment is changing due to an important need for modelling, influencing the requirements for more governance
- Assessment of model risk and KRI
- Potential risks and exposure evaluation
- Ever-changing model inventory
- Operational incidents registration and model risk database
- Model validation dashboard for development and implementation
- Define an homogeneous approach for model validation
Model Risk Management Conference
December 12, 2016
Main topics covered :
- Assess model risk through portfolios of models
- Integrated proxy models
- Non regulatory models integrated in MRM framework
- The importance of telling apart model risk and operational risk
- Key steps to implement an MRM framework
- The three dimentions of the Model Risk scorecard