RiskTech Forum

Chartis: The Risk Enabled Enterprise® Model Risk Management

Posted: 1 October 2014  |  Source: Chartis

The Risk Enabled Enterprise® is a two-year research initiative from Chartis, in collaboration with IBM, that looks at the enablers of enterprise risk management (ERM). Our research identified four strategic initiatives that firms can use to become “risk-enabled” across organizational structure and process, people and culture, and data and systems. This report, covering model risk management, is the first of four to examine these initiatives and identify best practice practical implementation.

Today, model risk management has become a major issue for financial institutions. These organizations increasingly depend on models to estimate risk, inform decision-making, to drive operations and strategy, and to set their future direction. As the business environment becomes more complex, and as regulatory scrutiny increases, it has never been more crucial for financial institutions to ensure their models are robust and fit for purpose. This is where the concept of model risk arises.

For this report, Chartis set out to understand the issues organizations face in managing model risk, and the strategies and best practices that can be implemented to address this increasingly important area. Our research included an online survey of 142 professionals working in a wide range of sectors around the world, as well as in-depth follow-up interviews with 25 survey respondents. We also held discussions with subject matter experts from IBM (to learn more about IBM’s approach to Model Risk Management, visit ibm.com/SmarterRiskAnalytics).

Highlights from the report include:

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