Model risk management

Digitisation ensures that, in addition to the number, the importance of models in the financial sector is continuously increasing. Existing approaches for managing model risk are therefore reaching their limits. The regulator also recognises the increasing importance of models and model risks and provides for further need for action with ever new requirements, e.g. within the framework of the TRIM (Targeted Review of Internal Models) project.

KPMG accompanies you in the development of sustainable model risk frameworks and also supports you in the implementation process. Our services range from the conception of model risk management guidelines to the structuring and implementation of a model inventory or the performance of model validations. In addition to our technical know-how, we also offer our customers sound and integrated project management expertise.

We have extensive experience in the context of projects to analyse and implement model risk management processes along the model life cycle, governance frameworks and model inventories. Furthermore, we have already carried out and supported numerous validations and implementations of frameworks for the validation of risk and assessment models. In particular, we have led software selection processes on the topic of model risk management several times. In addition, we have also built up extensive benchmark knowledge of model risk management frameworks and processes through a large number of audits of national and international banks as well as through our strong international network.

Overview of current model risk topics and our service portfolio:

We provide support from the initial gap analysis of model risk management to the implementation of guidelines, policies and processes along the model life cycle. This includes the design of the model risk framework, taking into account regulatory requirements.

We are also available at any time to support you with our expertise on fundamental questions such as the definition of the terms “model” and “model risk” as well as the determination of criteria for the identification of models.

We support you in taking stock of your models, defining essential attributes of the inventory and specifying business requirements for the IT solution of your model inventory.

We help you put your validation processes to the test and, if necessary, realign them to cope with the growing importance of models. Of course, we also actively support you with our experts in the validation of your models as well as in the specification of model validation standards.

Ultimately, the measurement of model risk is an essential factor for successful model risk management. We support you with quantitative and qualitative methods for determining the risk of your models so that you can optimally manage your risk appetite.

Our team has many years of experience and covers all relevant aspects around model risk topics – from basic processes and organisational structures to validation methods and regulatory requirements, both in terms of design and implementation. Owing to a wide variety of projects on model risks and the validation of models, we have proven expertise in this field. As a leading advisor and auditor of banks, we have extensive knowledge of best practice solutions in the area of model risk management and, if required, can also draw on a unique network of strong partners, which we would be happy to bring into your project.

Have we got you interested? Then please get in touch with us!