2015-2016
Situation & Context
GSIB received an MRA for model governance triggering a re-imagination of MRM Governance and Oversight through new leadership and a software implementation.
Diagnosis
One key issue was the lack of a complete & accurate model inventory. As such, there was no comprehensive view of model risk, a clear scope, responsibility and ownership of the risks. Compounded with animosity from the first line, the second line was also thrashing to maintain control over an enormous validation backlog and expanded workload.
Solution & Task
Design and setup a software tool to become the central repository for model inventory. Use this as a catalyst to comprehensively re-design MRM activities and align the procedures and workflows in ways that allow validators to regularly assess risk and enforce ownership and responsibility of first line responsibilities to own the models under their control. Create these processes in software that can enforce governance and controls, and provide reporting over it all.
Action
Implemented over 500 models in inventory into a software solution with an automated attestation process that ran quarterly. Designed model validation workflows for initial and annual reviews. Defined and coded risk-tiering algorithms into the tool. Created a dashboard that could show models, their risk tier/classifications, validations, findings all in a single dashboard that allowed management to wholistically view model risk across the bank.
Result
MRA was resolved, and the regulators “went away without further questions”. There was now a defined model risk management process and risk control that provided a transparent, accurate view to first line stakeholders and senior leadership.
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