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Model risk and governance

Effective model governance is vital for maintaining financial stability, regulators’ trust, and overall company performance. It involves establishing a robust framework for financial models' risk management, validation, and ongoing monitoring processes.

Moody’s Model Risk and Governance Solutions are designed to assist companies — from banks to corporates — with their model life cycle management needs.

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How can we help?

We help institutions — from banks to corporates — identify, assess, and mitigate model risks across the business, address regulatory demands, and make better decisions, all leading to an improved risk culture, increased resilience, and profitability.

01
Address regulatory demands

Leverage Moody's expertise to create a confident response to regulatory demands, including Federal Reserve Board and Office of the Comptroller of the Currency Supervisory Guidance on Model Risk Management as outlined in Supervision and Regulation Letter 11-7 and OCC Bulletin 2011-12. Expedite resolution to issues and Matters Requiring Attention that relate to model governance, validation, and ongoing monitoring throughout your business.

02
Implement a strong risk culture

Deploy our interactive model inventories, dashboards, and overall expert knowledge to standardize and automate your model risk monitoring analytics, improving quality and consistency of your model validation, monitoring, and overall governance.

Establish a strong risk culture, improve stakeholder confidence, and enhance decision-making by focusing on the metrics that matter.

03
Improve operational efficiency

Apply the latest technology embedded in our solutions to reduce your manual data management workload and focus on the metrics that matter most. Our solution packages the analysis into polished, executive-level deliverables, producing editable presentations, final reports, and accompanying appendices — all at the push of a button.

With our solution, you can save time and enhance operational efficiency by creating model management workflows and “audit-ready” documentation.

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Speak to our team today

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Model life cycle management

Model life cycle management involves developing, validating, approving, deploying, monitoring, and governing models used for risk assessment, financial forecasting, and decision-making. As model usage increases, so does the responsibility to effectively manage model risk. This applies equally to both internal and third-party vendor models. The sophistication of risk management and governance practices applied to each stage should scale with model complexity and the materiality of the relevant portfolios. Banks and corporates will therefore benefit from a flexible model life cycle management platform that can accommodate diverse model risk profiles and a range of model governance tasks.

Model lifecycle management
Model risk management

Model risk management

Appropriate model risk management (MRM) or model governance practices must be applied throughout the model life cycle to make sure models are valid, accurate, and appropriate for use. Such practices include monitoring model outputs, comparing model predictions with actual results, evaluating model performance under extreme conditions, reviewing manual adjustments, and more.
 

Applying effective model risk management practices throughout the overall model life cycle is crucial for creating a stronger risk culture, strengthening institutional resilience, enhancing operational efficiency, and improving strategic decision-making — setting a foundation for a bank’s long-term success.

Capabilities

01 Model Risk Monitoring

Model Risk Monitoring

Moody’s Model Risk Monitoring solution helps banks standardize and automate the analytical tasks associated with monitoring trends in model output, helping models remain applicable to the portfolio to which they are applied and keeping judgmental overlays properly calibrated.

Our solution brings together Moody’s proprietary data, advanced analytics, and generative artificial intelligence (GenAI) technology to provide an expert-curated ongoing monitoring reporting framework. It helps banks:

  • Automate analysis of expected default frequency (EDF) trends, probability-of-default (PD) and loss-given-default (LGD) dispersion, and manual overrides to make sure models and scorecards remain appropriate for the portfolio of intended use.

  • Schedule standardized reviews of scorecard overlay factor responses to make sure factor correlation, information value, and transition notching metrics remain within established thresholds.

Our solution helps deliver polished, executive-level reports, including editable presentations and data appendices, with seamless integration via custom model output files or application programming interface (API) connectivity to Moody's models.

02 Portfolio Stress Test Summary

Portfolio Stress Test Summary

The Portfolio Stress Test Summary solution performs batch stress testing on portfolios under historical, hypothetical, and simulated scenarios within a single obligor credit risk modeling approach and a regulatory capital framework.

It allows banks to upload custom model outputs or connect to Moody's models via API for a streamlined visual analysis.  

Use Moody’s Portfolio Stress Test Summary solution to:

  • Perform advanced stress testing and credit portfolio analytics by leveraging Moody’s proprietary data and advisory team expertise.

  • Automate generation of graphical and tabular stress test outputs. Users can also populate PowerPoint graphics via Visual Basic for Applications (VBA), allowing for iterative updates to dynamic content while preserving manual edits.

The Portfolio Stress Test Summary solution helps deliver polished, executive-level reports, including editable presentations and data appendices, with seamless integration via custom model output files or API connectivity to Moody's models.

Model Risk Monitoring

Moody’s Model Risk Monitoring solution helps banks standardize and automate the analytical tasks associated with monitoring trends in model output, helping models remain applicable to the portfolio to which they are applied and keeping judgmental overlays properly calibrated.

Our solution brings together Moody’s proprietary data, advanced analytics, and generative artificial intelligence (GenAI) technology to provide an expert-curated ongoing monitoring reporting framework. It helps banks:

  • Automate analysis of expected default frequency (EDF) trends, probability-of-default (PD) and loss-given-default (LGD) dispersion, and manual overrides to make sure models and scorecards remain appropriate for the portfolio of intended use.

  • Schedule standardized reviews of scorecard overlay factor responses to make sure factor correlation, information value, and transition notching metrics remain within established thresholds.

Our solution helps deliver polished, executive-level reports, including editable presentations and data appendices, with seamless integration via custom model output files or application programming interface (API) connectivity to Moody's models.

Portfolio Stress Test Summary

The Portfolio Stress Test Summary solution performs batch stress testing on portfolios under historical, hypothetical, and simulated scenarios within a single obligor credit risk modeling approach and a regulatory capital framework.

It allows banks to upload custom model outputs or connect to Moody's models via API for a streamlined visual analysis.  

Use Moody’s Portfolio Stress Test Summary solution to:

  • Perform advanced stress testing and credit portfolio analytics by leveraging Moody’s proprietary data and advisory team expertise.

  • Automate generation of graphical and tabular stress test outputs. Users can also populate PowerPoint graphics via Visual Basic for Applications (VBA), allowing for iterative updates to dynamic content while preserving manual edits.

The Portfolio Stress Test Summary solution helps deliver polished, executive-level reports, including editable presentations and data appendices, with seamless integration via custom model output files or API connectivity to Moody's models.

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Interested in learning more about our offerings? Our solutions specialists are ready to help.