modellriskpolicy
modellriskpolicy is a formal organizational framework that governs how an institution manages model risk. It defines the principles and requirements for identifying, assessing, validating, monitoring, and mitigating models used in decision making, risk management, finance, and regulatory reporting. The policy applies to all materially influential models, whether developed in-house or sourced from vendors, and to any tool or dashboard that relies on quantitative or statistical modeling.
Models are categorized by materiality, complexity, and impact on risk or capital. The policy requires an inventory
Governance bodies include senior management, a model risk committee, and an independent validation function. The policy
Models follow a lifecycle from design and development to testing, calibration, backtesting, and ongoing monitoring. Validation
The policy mandates ongoing monitoring of model performance, periodic reviews, and governance reporting. It requires remediation