Model Risk Management

Model Risk Management (MRM) in Financial Risk Management refers to the process of identifying, assessing, and mitigating risks that arise from using mathematical models to make financial decisions. These models help businesses predict outcomes, like loan defaults or investment returns. However, if the models are inaccurate or improperly used, they can lead to significant financial losses. MRM ensures that these models are validated, monitored, and regularly updated to reflect new data and changing conditions, enhancing decision-making and protecting against potential financial pitfalls.