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Solution Brief

Model Risk Management

Unlock clear oversight of your organization’s model risk life cycle

Overview

Learn more about model risk management

The issue

Strong model risk governance is essential for all financial institutions. Banks use the accounting credit impairment reporting (IFRS 9/CECL), evolving stress testing programs that affect capital planning and new regulatory requirements such as Solvency II and Basel III Endgame; all require comprehensive model validation. Effective model risk management (MRM) is also essential to gaining shareholder confidence and complying with regulatory specifications of the European Banking Authority, the US Federal Reserve and the UK’s Prudential Regulation Authority.

Governance is particularly vital for AI and machine learning (ML) models, which can make more accurate predictions in some use cases but also develop unfair biases that can impact the institution or its clients. AI and ML models need more MRM care – from frequent performance monitoring, constant data review and benchmarking, and better contextual model inventory understanding – to create well thought-out, action-ready contingency plans.

More than ever, you need clear oversight of your organization’s model risk life cycle so you can report to executive management and regulators with absolute accuracy on model risks.

The challenge

Increased model risk

As models grow more complex with the integration of new technology such as AI, GenAI and ML, banks take on greater model risk. SAS helps you understand and govern complexity and risk.

Inability to enforce best practices across the enterprise

With a fragmented model governance approach, there’s often little integration with siloed model development ecosystems. SAS addresses this by moving you from a limited view of model risk across the enterprise to a comprehensive view.

No integrated model information system.

To comply with regulations, banks need reliable, integrated MRM practices. SAS ensures that all risk categories related to models are identified, monitored and controlled.

Cost and resource constraints that hinder delivery of high-quality model documentation

This documentation is critical to properly controlling model development, testing, implementation, use and validation. SAS offers a solution that enables a single source of model documentation, allowing you to review models by model lineage, version, business line, model owner or customized factors.

Assessments by McKinsey and results from our customers have shown potential model governance
cost savings of

20% to 30%

Our approach

To fully understand and control model risk, banks need a fully integrated model risk life cycle for managing, documenting, validating, and auditing models to support internal decision making processes.

SAS approaches the problem by providing software and services to help you:

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Validate models

Independently review and validate all models to support existing supervisory guidance and business requirements. For example, the Comprehensive Capital Analysis and Review functionality recommends that banks maintain an inventory of all models used in the capital process that produce projections or estimates on revenue or loss projections.

Organize models

Design a model candidate assessment, a complete model inventory management module and an end-to-end model validation process.

Set policy and documentation protocols

Perform model-related issue tracking and enable thorough documentation and policy management for effective challenge and remediation plans.

Share information easily

Construct and disseminate reports with bundled tools for effective, top-down model risk reporting.

[SAS Model Risk Management] has a lot of advantages in its flexibility. We had no limits. We could produce the attestation workflow that we used from nothing. Robert Rapacciuolo US Model Risk Operations Manager, TD Bank

Read the customer story

SAS difference

With SAS, you can establish end-to-end governance of your entire model risk management life cycle, from risk identification to risk assessment.

Use it to:

Manage the entire life cycle

SAS provides complete document and workflow management, regardless of the model type, source or technology used to develop models.

Automate performance monitoring

Better understand how well models are performing by automating monitoring via threshold alerts and findings.

Apply governance to ML and AI in models

Intelligent automation saves skilled modelers and validators time when creating documents that govern AI and ML.

Capture model usage data systematically

Systematically capture the execution of models in any environment and enable regulators to fully understand how models are being used.

Operate a repeatable, reliable and auditable process

SAS makes it easy to track reviews, document assumptions, classify models and monitor performance.

Create a comprehensive, flexible workflow

Streamline processes for model limitation scoring, validation results, criticality ratings and modeling of interdependent relationships.

Centralize model information management

Establish a centralized model inventory that supports your internal policies and procedures across all business units. The solution's robust infrastructure includes permissions, version control and data mining capabilities. And you can import attributes and metadata – e.g., model limitation scoring, validation results and criticality ratings – from any type of model developed in any technology.
Document & track models throughout the model life cycle

Effectively track model issues, concerns, challenges and remediation with a rigorous model review and validation process that satisfies regulatory principles and expectations. A single source of model documentation consistently records the review and validation process, which can be can be examined at various levels, including model lineage, version, business line, model owner and more.
Gain greater insight into model risk concentrations

Analyze thousands of data points – using both quantitative and qualitative data – to gain greater insight into your organization’s model risk concentrations. Interactive visualizations tell your model risk story clearly and accurately to broaden institutional awareness and facilitate appropriate board-level oversight. And users can easily drill down through reports to learn more.
Keep pace with changing risk policies & regulations

Quickly tune your model review and validation practices to stay on top of ever-changing risk policies and regulatory requirements. Governance tools help enforce appropriate signoffs, legal reviews and testing on a consolidated platform.