Fortifying Model Risk: Coforge Builds Robust MRM Center of Excellence for US Banking Giant

Challenges.

• Managing risk across 250+ statistical models
• Need for enhanced model governance
• Ensuring regulatory compliance
• Mitigating risks in model theory, data inputs, outputs, and overrides
• Potential for significant penalties due to model failures
• Requirement for effective and timely model validation

Solution.

Coforge implemented a comprehensive model validation framework using SAS:

• Model Theory Review: Collaborated with model owners on segmentation and assumptions
• Data Input Validation: Assessed input data reconciliation and variable selection
• Data Output Evaluation: Conducted in-sample, out-of-sample, and benchmark validation
• Overrides Review: Rigorously examined magnitude, frequency, and business justification

Key highlights:

• Consistent on-time delivery of model validation reports and recommendations
• High acceptance rate of validation recommendations by model owners
• Near-perfect model pass rate after addressing identified issues
• Significant reduction in potential monetary penalties

The impact.