Why MRM teams are embracing automation
Throughout this past year, financial institutions have been recalibrating their model risk management (MRM) frameworks for flexibility, resilience, and speed. Many risk analysts have found it beneficial to take on the technologist’s mindset, embracing agile practices and open source.
At the RiskMinds International Conference last December, Anna Slodka-Turner, Global Head of Risk and Compliance Practice at Evalueserve, compared this process to building and flying a plane. The MRM infrastructure implemented by banks in the past few years has finally been put to test. The plane has met air, and risk teams need to adjust to any turbulence mid-air.
At Evalueserve, we’ve seen clients start to combat uncertainty through automation. Even before the disruption, some financial institutions were dabbling in implementing automation into their MRM frameworks, while others were still relying on manual methods. Now, more financial institutions are looking towards automation to enable the following areas:
- Standardizing model development and validation processes
- Leveraging workflow tools to enable collaboration between model risk managers, users, and developers.
- Providing holistic oversight on the review, monitoring, and testing schedule for the full model inventory
With no current vendor system offering solutions in all three areas, along with increased stress testing requirements, MRM teams are resource-crunched, and major global banks are looking for solutions that increase automation and standardization. The goal is not to move towards a one-size-fits-all approach but to allow for more precision and fine-tuning of models. We have seen first-hand how MRM has evolved from a task-oriented function into an avenue that brings banks tangible impact and value.
Deep dive with experts at upcoming risk events
Last December at RiskMinds International, we covered “Risk Models Post COVID Changes in Design and Functionality.” Alongside clients at major global banks, we shared how institutions are focusing on making their MRM practices more flexible, resilient, and collaborative. The session focused on how banks should:
- Look at current and anticipated model performance issues
- Evaluate how quickly current models can be adjusted
- Ensure governance processes are efficient
This week, our experts will be presenting at the Advanced Model Risk Conference held by the Center for Financial Professionals. Join our session on March 25th at 11 am for “The Path to Automation in Model Validation and Monitoring,” where Anna Slodka-Turner, Steve Lindo, and Richard Boesch will share:
- Why and what to automate
- How to prioritize opportunities for automation
- How to best scale up for automation
- The trade-offs between in-house and external development