Deloitte: Global Model Practice Survey 2014 - Validation at Risk
Posted: 19 June 2014 | Source: Deloitte
Increasing model complexity has given rise to a new type of risk faced by financial institutions: model risk.
Both regulatory regimes and financial institutions have taken steps to address this type of risk. The cornerstone in managing model risk is an independent Model Validation function (hereafter: “Model Validation”).
Model Validation provides an objective review to model development, hence addressing the issue of model risk. Furthermore, Model Validation plays an important role in assessing the compliance of models to internal and external regulations. As a result, Model Validation provides comfort to the stakeholders in the use of the models and thereby improves model-based decision making within an organization.