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With SAS® Model Risk Management, banks gain clarity on risk models

New solution helps banks prepare model governance programmes for stringent regulatory standards

Banks continue to juggle growing demands to aggregate and analyse risks, stress test overall balance sheets, and assess the capital adequacy and variety of performance and regulatory measures. Since performance depends on many complex models, banks must develop and demonstrate a robust risk model governance strategy to regulators. Failure to actively manage business and regulatory models can expose banks to uncertainty and possibly lead to higher capital requirements.

Today, SAS is rolling out SAS® Model Risk Management, a new model-governance solution that provides a complete and detailed view of all models within the bank, so that the associated model risks and related findings can be precisely monitored and managed. The solution caters to the needs of all the interested parties of various models and provides transparency on any model weaknesses or results produced by model usage.

“Model governance must become a fundamental element – a standard operating procedure – for chief risk and compliance officers in our industry,” said Michael Versace, Global Research Director for Risk and Digital Strategy at IDC Financial Insights. “An enterprise approach to model risk management that supports all risk categories is an innovation necessity for regulated entities in all financial sectors and for firms of all sizes."

Banks are increasingly finding that effective management of their analytic model inventory – including understanding model relationships and bank-specific workflows – is a critical component to meeting regulatory requirements and meeting business needs. SAS relieves banks from reliance on disparate ad hoc solutions, providing a comprehensive, aggregated view of model risk to manage model lifecycle workflow.

The new solution centralises model-inventory management, including document management and source code control, with decentralised access and a complete model-validation process. The solution’s dashboards bring together an aggregated view of a bank’s entire system of models to pinpoint areas of concern and opportunity.

With SAS Model Risk Management, institutions can organise and manage their models, assist in the complete validation cycle, and manage change requests, usage tracking, ad hoc correspondence and model-related issues. Banks can also perform policy and exception management for effective challenge and remediation plans with thorough documentation and customisable workflows to meet any business need.

“Regulators as well as executive management teams are increasingly scrutinising how banks develop, validate, approve and implement risk performance models,” said Troy Haines, Senior Vice President of Risk Research and Quantitative Solutions at SAS. “SAS Model Risk Management helps firms address both regulatory and business-as-usual model governance requirements.”