In response to the far reaching consequences of Model Risk, regulators have increased scrutiny to ensure that financial institutions maintain effective and sustainable Model Risk Management (MRM) programs.
Demonstrating not only the validity of individual models but also the efficacy of the controls covering the design, development, revision, and use of models is of paramount importance. Many organizations are struggling to meet this mandate given the size and complexity of the typical model portfolio, the increasing use of algorithms and the sophistication of underlying technologies, and the diversity of the envrionments in which they are used.
KPMG member firms have developed an MRM toolkit which is designed to provide guidance on implementing an effective MRM function and framework within a financial entity. The guidance aims to help banks understand the importance of Model Risk, how it may affect the P&L and capital and the most important steps to develop a Model Risk framework.
The MRM toolkit provides guidance which can be leveraged by financial institutions relying on the use of models, including banks, insurance firms and asset management companies.