Given the complexities of the global marketplace, it is critical that FIs improve the management of their model life cycle to improve efficiencies and controls. By taking a more integrated, strategic approach to the management of the model life cycle, banks can unlock massive model development and validation potential.
Traditional nowcasting has served its purpose well, but the COVID-19 crisis proved a challenge for typical nowcasting models. Today’s next-generation nowcasting approach reduces the number of variables for more accurate outcomes and making it easier to interpret estimates, understand structural breaks, and provide up-to-the-moment information.
Organizations must adopt concrete, dynamic frameworks to manage AI risks. This pinpointing, prioritization and management of AI risks now should be part of a holistic, long-term strategy to create value for the future.
As markets slowly resume normal activity, a new credit cycle will begin, offering innovative leaders a rare opportunity to expand into credit markets and win market share.
COVID-19 has amplified the scope and use of model risk management based on advanced analytics.
In a post-COVID-19 world, proactive model risk management by all lines of defense is needed now – not only to meet new regulatory expectations, but also to strengthen institutional resiliency.