Model validation is a requirement, but some extra effort can help your organization find benefits beyond checking boxes.
Model validation is a regulatory necessity. But for many financial services organizations – especially smaller ones – the road to efficient model validation is not always smooth.
Internal and external factors can cause gaps, inefficiencies, and frustration in an organization’s model validation process. Such challenges can be technical, logistical, or structural – but a common thread runs through them all.
Understanding and addressing the barriers to model validation processes can reduce the number of functional headaches and provide benefits beyond checking the regulatory boxes.
Reliable models can inform more effective decisions and provide a clearer picture of risk in existing customer and product portfolios. Higher model reliability can also help direct an organization’s new product and service pursuits. Decisions that once seemed risky might lie within an organization’s risk appetite when viewed through a more dependable lens.
But to take the most effective steps toward problem-solving and opportunities, organizations must first identify their barriers to model reliability.