The model risk management policy template is a document that outlines the policies and procedures for managing the risks associated with the use of models in financial institutions. It is designed to help financial institutions identify, assess, and mitigate the risks associated with the use of models. The template includes sections on model governance, model development, model validation, model monitoring, and model documentation.
The model risk management policy template is an important tool for financial institutions that use models to make decisions. It helps financial institutions to ensure that the models they use are sound and that the risks associated with the use of models are managed effectively. The policy template can also be used by financial institutions to demonstrate to regulators that they have a sound model risk management framework in place.
Model Governance
The model governance section of the model risk management policy template outlines the roles and responsibilities of the various stakeholders involved in the model risk management process. It also includes provisions for the establishment of a model risk committee and the development of a model risk management charter.
The model governance section of the policy template should include the following:
- Roles and responsibilities of the model risk committee
- Responsibilities of the model risk manager
- Responsibilities of the business units that use models
- Responsibilities of the IT department
- Responsibilities of the model developers
- Responsibilities of the model validators
- Responsibilities of the model monitors
Model Development
The model development section of the model risk management policy template outlines the requirements for the development of new models. It includes provisions for the use of sound development methodologies, the use of appropriate data, and the independent validation of models.
The model development section of the policy template should include the following:
- Requirements for the use of sound development methodologies
- Requirements for the use of appropriate data
- Requirements for the independent validation of models
- Requirements for the documentation of models
- Requirements for the testing of models
- Requirements for the review of models by senior management
FAQs
What is a model risk management policy template?
A model risk management policy template is a document that outlines the policies and procedures for managing the risks associated with the use of models in financial institutions.
Why is a model risk management policy template important?
A model risk management policy template is important because it helps financial institutions to identify, assess, and mitigate the risks associated with the use of models. It also helps financial institutions to demonstrate to regulators that they have a sound model risk management framework in place.
What are the key components of a model risk management policy template?
The key components of a model risk management policy template include model governance, model development, model validation, model monitoring, and model documentation.
