The IIA has published a new guide, Assessing Model Risk Management: A Risk Management Professional’s Guide, offering practical support for assessing model risk management (MRM). The guide is particularly relevant for risk management professionals and internal auditors whose responsibilities extend beyond traditional internal audit activities.
As organizations increasingly rely on models in decision-making, model errors can have significant implications for strategic decisions, regulatory compliance, and overall organizational risk. The guide covers key aspects of model risk management, including governance, roles and responsibilities, policies, controls, validation, and ongoing monitoring. It also addresses emerging model risks associated with artificial intelligence and large language models.
The guide helps professionals strengthen their capabilities in model risk assessment, clarify responsibilities across organizational functions, and align model risk management with risk appetite and strategic objectives.
Practical tools to support model risk assessments
The guide is accompanied by three tools designed to support model risk management assessments and clarify responsibilities:
- Example of Model Risk Management Assessment: A customizable assessment tool covering different aspects of model risk management.
- RACI Chart: A tool for defining roles and responsibilities in model risk management.
- Third-Party Assessment: Guidance for assessing model risks associated with third-party models.
The guide and accompanying tools are available to IIA members.