MONITRO - our Next Generation Model Risk Management solution (powered by Artificial Intelligence, Machine Learning & Natural Language Generation) for automation of Model Monitoring and Validation processes. It enables smart & cost-effective compliance with related requirements of Basel Advanced Approaches, IFRS 9 / CECL, Stress Testing, and SR 11-7 regulations. As a result of IFRS 9 regime, an Independent Model Validation requirement kicks-in even for non-IRB banks, so banks have three options as way forward:
- Internalize the function by hiring an independent model expert: Key issues with this approach are lack of such skill-sets in region, lack of utilization of resource in other activities makes it expensive, high attrition rates, difficult to prove independence to Auditors/Regulators.
- Outsource to Consulting firm each year: It's a big pain to go through procurement process each year and it is a long, time consuming and expensive process. Typically focus is on rubber stamping of models rather than actual improvements. Regulators sometime perceive it as lack of internal capabilities of the Bank.
- Internalize the function with smart tools and processes: We believe this is the way to go as most of the validation tests/processes/reports can be easily standardized. Latest technologies are very cost effective. Lack of manual intervention makes it easier to prove 'independence' of results to Auditor / Regulator.