Model risk platform: off a rigid package, onto a system the bank controls

The challenge

Banks rely on complex mathematical models to price trades, measure risk and decide how much capital to hold. Because so much rides on them, regulators require banks to govern those models carefully, checking they are sound and tracking every decision made about them. The client, a global investment bank, was managing all of this on a rigid, off-the-shelf product. When the Bank of England's regulator published new rules (its SS1/23 supervisory statement) for how banks identify, govern, check and monitor their models, the packaged product simply could not be changed to meet them. Its workflows and approval steps were fixed in exactly the places the new rules needed them to be flexible.

Our approach

We designed, built and delivered a bespoke system that put the bank back in control of its own process.

1. The whole life of a model in one place. The system follows each model through every stage, from first identifying it and rating how risky it is, through building it, having it independently checked, approving it, and monitoring it over time.
2. Governance that fits the rules, not a vendor's product. The workflows, sign-off steps and multi-stage approvals can be configured to match the new regulations, and adjusted again as the rules or the bank's own standards change, instead of being locked to a software vendor's release cycle.
3. A defensible record behind every decision. Every action is captured in a full audit trail, and the right people are required to sign off at each step, so the bank can show its regulator exactly how any model was governed and approved.

The result

The bank moved off an inflexible package and onto a system it controls. Its governance and approval processes now match the new regulations rather than working around a product's limits, and there is a clear, auditable record behind every decision made about a model, ready to stand up to a regulator.