Model Risk Management for Financial Institutions
Financial institutions rely on sophisticated models to monitor and manage business and regulatory risks across the organization and to perform supervisory mandated stress tests. Reliance on inaccurate or poorly performing models can produce unintended consequences that can result in financial loss, reputational exposure, or regulatory action.
How Crowe Horwath LLP Can Help
At Crowe, we bring together industry expertise, innovative technology solutions, and experienced professionals to help financial institutions operationalize and manage model risk. Our approach is founded upon a model risk management framework designed to meet regulators’ expectations while reflecting each institution's unique risk environment. The Crowe framework includes:
- Model inventory and risk assessments – Crowe professionals can help you identify and aggregate models by risk levels to obtain a true view of your enterprise model risk and manage those risks accordingly.
- Model development and implementation – Employing strong project management skills and comprehensive knowledge, Crowe modeling specialists can help financial institutions develop and implement models that are appropriate for the size and complexity of each organization.
- Model validation – Model validation verifies that models (such as ones for value at risk, allowance for loan and lease losses, capital models, or anti-money laundering) perform as expected. The Crowe validation approach is aligned with model risk management guidance from the Office of the Comptroller of the Currency and the Federal Reserve.
- Model calibration – Using quantitative analysis, prescriptive methodologies, and well-defined change control procedures, Crowe professionals help institutions calibrate models and provide documentary evidence to demonstrate to regulators and auditors that risks are being monitored at appropriate levels.
- Model governance – Combining sound model risk management practices with internal audit expertise, we execute tailored, risk-based internal audit programs to identify control gaps and provide valuable recommendations.
- Model foundation – Through our Crowe® Model Risk Manager tool, we deploy enabling and proprietary technology to assist our clients in executing and maintaining effective, consistent model risk management processes.
Crowe® Model Risk Manager
More effectively manage model risk through technology. Learn More