The role of the Model Validation function to manage and mitigate model risk

TL;DR

This paper discusses the importance of the model validation function in managing and mitigating model risk through collaboration with other departments, emphasizing its role in designing and implementing risk mitigation strategies.

Contribution

It highlights the critical role of model validation in the broader context of model risk management and mitigation, providing a taxonomy and collaborative framework.

Findings

Model validation is essential for effective risk management.

Collaboration between validation and other departments enhances risk mitigation.

A taxonomy of model risk aids in structured management.

Abstract

This paper describes the current taxonomy of model risk, ways for its mitigation and management and the importance of the model validation function in collaboration with other departments to design and implement them.