Assessing Model Risk Management: A Risk Management Professional's Guide
Risk Management | Issued and Effective | October 15, 2026
Strengthen model risk management with practical advice for evaluating models across the organization.
Created especially for risk management professionals and internal auditors who take on responsibilities beyond internal auditing, this guide explains how model errors can affect strategic decisions, regulatory compliance, and enterprise risk. It examines MRM governance, policies, procedures, controls, validation, monitoring, reporting, and communication with senior management and the board. It also addresses emerging model risks associated with artificial intelligence and large language models.
Three companion tools help practitioners evaluate model soundness, clarify responsibilities, connect model risk to risk appetite and strategy, and support effective oversight across the three lines.
After reading this guide, risk management professionals and internal auditors who take on responsibilities beyond internal auditing will be able to:
- Explain how model errors can affect decision-making, regulatory compliance, and enterprise risk.
- Define their role in coordinating model risk management within the broader enterprise risk program.
- Connect model risk appetite and material models to organizational strategy and business objectives.
- Evaluate MRM governance, policies, procedures, controls, and oversight structures across the three lines.
- Assess model design, development, approval, implementation, use, monitoring, and retirement.
- Evaluate validation practices used to confirm ongoing model soundness.
- Identify emerging model risks, including risks associated with artificial intelligence and large language models.
- Plan, perform, and report on model risk management assessments.
- Communicate model risk assessment results to senior management and the board.
- Apply companion tools to support MRM assessments, clarify responsibilities, and evaluate third-party model risk.
Tools to use with this guide
Example of Model Risk Management Assessment
RACI Chart
Third-Party Assessment