Since the regulatory guidance of 2011, model risk management has evolved to encompass all models within an organization. The need to establish broader coverage prompted institutions of all sizes to develop ways to address model risk in a more holistic fashion.
Most have gone through the process of identifying, cataloging, and prioritizing the various models used throughout the organization based upon their purpose, use, and impact. We’ve seen various approaches, including model classifications, corporate governance policies for multiple classes of models and, in the case of large organizations that can have over a thousand models in inventory, the formation of sizable model risk management departments with teams of quantitative and model governance experts.
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