Developing, validating and monitoring multiple models is hard work. Regulators want high-quality, well-produced reports. Demand for testing is unpredictable, and with no shared understanding and patchy documentation, there’s a lot of back-and-forth. Maintaining the talent pool can be a challenge – but few banks want to add headcount. And of course, budgets are always under pressure.
The right solution might not be immediately apparent, but there are ways to move forward. Provided you access the right expertise, knowledge and support, parallel processing and automation tools can make processes for testing, documenting and reporting on models faster, smoother and more efficient – and at a reasonable cost. In this post, we set out a simple four-step process you can use to make it happen.
Why aren’t banks doing more to optimize their model risk management processes?
One reason is the way most quant and risk functions work today, which could make introducing automation toolkits seem harder than it really is.
We tend to assume that automation depends on scale, uniformity and repetition. And it’s true that models and documentation are often inconsistent across different divisions, with a mix of internal and vendor models, and no single library bringing everything together. There are also multiple data sources, and they’re constantly changing.
However, even small pools of similarity open up opportunities. And with some carefully planned tweaks to job specs, processes, formats and templates, those opportunities can make a big difference.
Four steps to re-engineer your risk model testing processes with automation
The benefits of process re-engineering and automation
Once achieved, process re-engineering and automation can realize a host of benefits.
Overall, we believe that process re-engineering, parallel processing and automation of model testing is both desirable and easily achievable. With the right support, you can realize big time and cost savings without disrupting existing workflows or rethinking your whole IT setup. Check out this case study to see how we helped a leading US investment bank achieve 50% efficiency gains by taking a smart approach to automation.
If you’d like to learn more about how automation and process re-engineering could help you, click HERE to send us your query.