The model inventory is the central repository for all models and the foundation for efficient model risk management. It contains the scope for model risk management but is also the source for all information about model risk.
Stronger model governance across the entire model lifecycle is a key requirement for the model risk management framework.
Successful model risk management framework implementations are often supported by model risk management tooling.
Model monitoring can help to alleviate resource pressures in both model development and validation. For instance, it offers more frequent and up to date information on the quality and materiality of models, without performing periodical manual model validations or first line reviews.
Most banks have indicated that they intend to enhance their framework in a number of areas within the next two years. At least more than half of the banks have such intentions within the areas of analytics and reporting, scope extension (including model in scope of the model risk management framework), model risk governance, model risk policies and standards, and standardisation of processes. Of these areas, model risk policies and standards and standardisation of processes are considered as the most challenging areas to enhance.
EMEA Model Risk Management SurveyThe answers to the questions in this article are included in the first edition of the Deloitte EMEA Model Risk Management Survey. This survey presents our insights into the current model risk management practices and challenges of banks across Europe, Middle East and South Africa. It was conducted between November 2020 and February 2021. A total of 80 banks across EMEA participated. The survey covers all the key building blocks of model risk management across four themes: governance, model landscape and inventory, technology and tooling, and monitoring and reporting. It renders valuable insights into model risk management to help banks to be responsible businesses.