Contributed on December 18, 2014

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BRIDGEi2i POV – The Importance of Model Governance

Description

Though models play an important role in understanding complex and increasingly sophisticated business environment, significant model-related losses continue to occur at an alarmingly high rate.

BRIDGEi2i’s solution MSquare addresses this need:

– Enables well defined model governance process that addresses regulatory needs
– Single repository for all models: auditable & transparent
– Visibility to leadership team – objective, consistent assessment of model risk
– Proactively identifies performance issues & drill down to key drivers
– Automated to reduce time & effort, to deploy & track models (any frequency)

To know more visit – http://bridgei2i.com/Model-Governance-and-Monitoring.php

Transcript

@ 2014 BRIDGEi2i Analytics Solutions Pvt. Ltd. All rights reserved
The Importance Of
Model Governance
@ 2014 BRIDGEi2i Analytics Solutions Pvt. Ltd. All rights reserved Why Modelling? Decision making
•Understand COMPLEX BUSINESS DYNAMICS & BEHAVIOUR PATTERNS
•Provide information TO DRIVE OPTIMAL management decisions
•Enables industries to BUILD DATA DRIVEN ASSESSMENT OF UNDERLYING RISK
•Facilitate industries to model changing economic and regulatory landscapes quickly and economically.
Why Modelling? 3
Can we trust Models blindly?
Though models play an important role in understanding complex and increasingly sophisticated business environment, significant model-related losses continue to occur at an alarmingly high rate
A financial services firm with $13 billion in annual revenues overstated projected earnings by $2.6 billion due to model error
A $2 billion financial firm had to restate earnings by $70 million due to a model error
A large financial institution failed to assess the known risks on its derivatives in its models. The firm has since lost more than $30 billion
I made 140 decisions today… All WRONG! How do we assess & manage Model Risk ?
4
Model Development
Model Use
Model Validation
Model Monitoring
•Define standards for model acceptance – data, metrics, process
•Focus on assessing validity of model assumptions
•Test for specification risks
•In depth documentation of considerations, approach, key risks
•“Effective Challenge” to entire model development approach
•Independent assessment of underlying assumptions
•Recommend alternative approaches to evaluate & decide
•Document key risks & measures
•Assign Tiers to model based on Impact
•Inventory of active and approved models
•Process to manage Model Use
•Oversight on model usage & rationale
•Proactively monitor model performance
•Define performance criteria – objective & transparent – refine benchmarks
•Visibility to key stakeholders
•Respond to performance shifts
Model
Governance 5
Why Model Governance?
AHA!
Control Frameworks
Robust Models
+
= Proactive in managing Model risks
Consistent
Practice
Logical
Flow
React Quickly
and Uniformly Increase confidence in the model results Call For Action Transparency Monitor Progress
Allows Clear
Responsibilities For Work Streams
Enhance Risk Management
effectiveness BRIDGEi2i point of view for managing Model Risk
6
Model Risk Rating Policy and Procedures
Model Validation Based on “Effective Challenge”
Model Development and Implementation Policy
Model Inventory & Documentation
Proactive Model Monitoring & Response Mechanism
Robust Model Risk Governance Automated, single model tracking platform, with consistent approach, to proactively identify and react to potential issues
Model Governance Process
Model Lifecycle Management
Proactive Monitoring & Alerts
Transparency – Performance & Inventory
•Enables well defined model governance process that addresses regulatory needs
•Single repository for all models: auditable & transparent
•Visibility to leadership team – objective, consistent assessment of model risk
•Proactively identifies performance issues & drill down to key drivers
•Automated to reduce time & effort, to deploy & track models (any frequency)
M Square Platform
BRIDGEi2i’s Solution – MSquare
7 About BRIDGEi2i
8
To be a trusted partner for businesses, helping them achieve accelerated outcomes by simplifying analytics and embedding it in their DNA.
BRIDGEi2i is an Analytics Solutions company focused at helping you BRIDGE
VISION
Transform and visualize big data into meaningful business metrics
INFORMATION
Identify underlying patterns, understand behavior and predict outcomes
INSIGHTS
Operationalize data driven decisions to realize sustainable business value
IMPACT
Delivering Sustainable Business Value by Institutionalizing Data Driven Decisions Thank You
enquiries@bridgei2i.com
www.bridgei2i.com
: BRIDGEi2i