Model risk management

We help you develop structured model risk management (MRM) frameworks to support you to implement and maintain a large number of models. We help with:

• data and information management – understanding data sources and aggregation processes, how the data is being used across all models, and supporting the establishment of data lineage for model inventory, model development and validation, including data flow mapping, data governance and quality testing
• design and build of a MRM framework – including policies and controls, operational procedures, model life-cycle standards and templates
• design and build a platform to manage model inventory and inform model risk reporting
• monitoring and reporting – including key risk indicators, dashboards, risk appetite statement and framework.

Our model risk maturity model is an assessment tool for evaluating progress toward your MRM goals, assessing how well your organisation identifies, assesses, manages and monitors model risk. We help with:

• end-to-end gap analysis assessment of the maturity of MRM practices against regulatory expectations, and potential remediation actions to close gaps identified
• assessment of both the level of compliance to relevant regulatory standards and the effectiveness of MRM practices.

The model life cycle begins by defining business and technical requirements, and evaluating whether an internal model or pre-existing solution from a vendor would work best. We can provide specialist resources to support your model development activities, including the production of underlying standards and documentation for a broad range of models, covering credit, market and operational risk. 

Model validation is a key control and confirms that an institution’s model is aligned with business and regulatory expectations. Our team can support data validation, including both quantitative and qualitative activities across a broad range of models. We can support:

• independent model validation – focusing on key components related to the conceptual design, system, data and processes
• automating model validation testing activities to improve efficiency and quality
• producing model validation and periodic review reports.

We can support with developing or enhancing model implementation processes and controls, as part of your wider model risk management framework. This includes:

• comprehensive and thorough implementation testing prior to deploying models to the production environment
• ensuring models are implemented as designed and are consistent with the documented specification
• creating and reviewing robust documentation over the design and the outcome of implementation

With regular changes in business activities and operations, and market conditions, it's important to adjust your modelling requirements to ensure your model remains fit for purpose. Our governance, policies and control framework services include:

• support in the design of model risk appetite statement and associated model risk life cycle policies, standards and procedures, including model change control procedures
• support in the design of appropriate model risk control definitions and in the review of the effectiveness of model controls
• designing and testing model performance monitoring – including assessing all components of the model to ensure they function as designed, enhancing model monitoring process, standards and controls.

We can support you with additional specialist resources to help your existing team handle model development and validation peaks, model reviews and internal audit reviews. Working across all three lines of defence, we can help with:

• automating repetitive tasks
• establishing comprehensive policies and procedures
• standardising model documentation, standards and templates
• subject matter experts for internal audit model reviews.