Model Risk

Model risk refers to the potential for a model, often used in finance, analytics, or decision-making, to provide inaccurate or misleading results. This can occur due to flaws in the model's design, incorrect assumptions, or insufficient data. As organizations rely on models to predict outcomes or assess risks, any errors can lead to poor decisions and financial losses. Managing model risk involves regular testing, validation, and updates to ensure models remain accurate and reliable. Understanding and mitigating this risk is essential for maintaining confidence in the results these models provide.