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.

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Unlocking the benefits of model life-cycle management

At many financial institutions (FIs) the end-to-end model life-cycle environment—encompassing model development, validation, and monitoring—is plagued by inefficiencies, inconsistencies, lack of transparency, and poor controls that frequently slow the response to competitive challenges and regulatory requests. Understanding and defining the target state, identifying the pain points and outlining the design principles will help banks unlock the massive model development and validation potential.

This article was originally published on McKinsey.com on June 10, 2021, and is reprinted here by permission.