bridgei2i pov - the importance of model governance
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@ 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?
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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 ?
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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
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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
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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
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About BRIDGEi2i
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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
