Model Risk Management Survey 2022

It seems there is no stability within the environment in which banks operate, run their businesses and from the perimeter of a risk manager in the area of estimation and forecasting of the bank‘s risks. Banks are constantly reviewing and testing their mathematical models, broadening their scope of use and adapting to new requirements.

Quite soon after banks implemented IFRS9 and related models became reasonably stable and reliable, the COVID-19 pandemic tested the flexibility of their frameworks to incorporate unprecedented shocks in their portfolios' behavior. Regulatory models have recently been finishing a transformation process imposed by the EBA guidelines; but before all the related changes are finally approved and implemented, a new set of complex statistical models aimed at incorporating ESG components needs to enter into the backlog of every risk manager.

With the increasing complexity and overall number of mathematical models in place, financial institutions across the globe are being challenged and need to adjust their approach to Model Risk Management (MRM) adequately.

With increasing costs of manpower, insufficient capacities of modelling specialists, institutions must push themselves towards automation and digitisation. A proper MRM framework and related technology solutions to empower it start to play an even greater role than in the past.

All of the above led us to perform a survey across financial institutions globally, specifically focussed on MRM and the relevant technology solutions tools in order to provide mainly answers to the following:

• how financial institutions see the importance of proper MRM,
• where are the main benefits which can be achieved by successfully implementing relevant frameworks,
• how far are organisations in terms of utilising of modern technology solutions and tools to support automation and digitisation in the MRM area.

We believe you will also find this report insightful and inspirational in terms of how you can possibly leverage MRM in your organisation, and we would like to thank all the participants in this survey for their time and valuable answers.