Risk Dynamics provides leading expertise in model risk management

Our dedicated experts, global regulatory expertise, and proprietary tools and frameworks help clients manage their model risk effectively and efficiently.

What do we do?

Risk Dynamics helps clients establish and enhance frameworks for model risk management (MRM) in financial services and beyond. Combining industry-standard approaches, benchmarks from our global MRM survey, and insights from our work with leading banks worldwide, we help clients create best-practice, sustainable foundations for MRM. We also assist them in building new capabilities, and in deploying new technology to meet increasing regulatory expectations efficiently.

06.Model Risk Management_01 (1)
06.Model Risk Management_02 (1)

Our impact

For over 15 years, Risk Dynamics has helped banks, insurers and asset managers around the world stay at the forefront of model risk management. We have established robust, comprehensive model governance and extended MRM’s reach into new model types, particularly in emerging areas such as artificial intelligence. We have created detailed, practical MRM guidelines and templates; reduced MRM costs through standardization and demand management; and trained teams on topics from MRM fundamentals to modelling techniques.

Model risk management survey and roundtables

Since 2015, we have convened the MRM community annually to discuss critical development and industry issues in a peer-to-peer environment. Supporting this effort is our series of MRM surveys, which covers all geographical regions and all financial services sectors. Participants receive personalized reports that include quantitative benchmarks and key industry trends. To participate in the survey and roundtables, please contact us.

Model risk management workflow tool

As models proliferate and development processes become more complex, firms are increasingly relying on MRM workflow tools to manage the end-to-end model lifecycle.
Based on our deep experience in MRM and our clients’ needs, we have developed Wave for MRM, a dedicated workflow tool that combines the pre-populated standards and agile flexibility that today's complex, fast-moving organizations require.

Case studies

  • Rapidly enhancing an MRM approach to meet regulatory requirements

    Banks are facing growing pressure to have robust, reliable model governance. A European bank with significant US operations received regulatory feedback that its MRM approach needed wide-ranging enhancements within a short time. These enhancements included raising the profile of model governance across the global workforce, and creating a plan to roll out the changes throughout the model inventory. To assist in this effort, Risk Dynamics:

    • Helped the bank redesign its end-to-end MRM governance and standards, with input from internal and external stakeholders
    • Updated at least 10 separate policy documents
    • Designed and deployed a suite of seven online training modules to all relevant bank staff 
    Risk Dynamics deployed an experienced team to all key client locations and worked closely with global leadership to design and implement enhancements across the model lifecycle. Proceeding through a structured program of policy updates, the team created practical guidelines for development and validation, deployed a detailed model risk-rating approach, and rolled out training to make model risk more visible across the firm.

  • Designing a state-of-the-art MRM framework and function

    To ensure strong, consistent MRM, a European bank aspired to build a state-of-the-art MRM framework and function within one year. Risk Dynamics worked with the bank’s new MRM team to design the foundational elements needed for the MRM function, such as a detailed roll-out plan to support full implementation. These elements also included:

    • Strong model governance, with detailed roles and responsibilities designated throughout the model lifecycle. We designed the MRM function and committees and syndicated the new responsibilities to all business stakeholders. We contacted 25+ business lines, engaged with 50+ stakeholders, and conducted 60+ workshops on this topic
    • MRM methodologies incorporating standardized processes for model identification, tiering, risk-scoring, and risk appetite. We ran pilots in three countries, where we trained the local MRM function in the updated MRM methodologies and expected syndication to business stakeholders
    • A model inventory that captured over 1,000 models across the organization
Copyright © 2023 Risk Dynamics, a McKinsey company