Model Risk Management | KPMG | ZA

Model Risk Management

Model Risk Management

In this context, models are not only meant to be valuation and risk models, but also other models used for business decision or financial reporting.

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The global financial crisis showed that controls and governance frameworks associated with valuation, risk and other operating models can be fragmented, incomplete or unreliable. Therefore, regulators have increased scrutiny to ensure that financial institutions maintain effective and sustainable model risk management programmes.

In this context, models are not only meant to be valuation and risk models, but also other models used for business decision or financial reporting.

According to CRD IV, Article 85, all institutions need to implement policies and processes to evaluate and manage the exposure to model risk. In addition, there are specific requirements for valuation models (e.g. Pillar 2, PruVal) and further requirements for internal risk models (e.g. IRBA, IMM, IMA, AMA).

This document provides more information.

Financial Services

As financial services continue to recover from the crisis and strengthen risk management, the focus remains on regulations and cost reduction.

 
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