With the increasing complexity of financial transactions, the reliance on models has played a larger role, and the risks that arise from improper use have escalated. Not only does resource allocation become an issue, but significant financial losses can result from relying on models without a proper validation process in place.
Whether your models are developed and maintained in-house, or externally by 3rd party vendors, firms need to ensure that key practices are in place in order to effectively manage model risk to protect against adverse consequences.
Download Top 10 Best Practices for Managing Model Risk to understand:
- Proper model selection and the need for thorough evaluation
- Complete model lifecycle from development, through testing and re-verification.
- Roles and responsibilities in the validation process to establish independent validation
- Supporting systems to keep track of issues and test cases, and to manage the process
- Benchmarking as a validation tool to ensure that firms have a secondary method of verifying their calculations outside of their primary system