Independent Model Validation
Review whether financial risk models are conceptually sound, correctly implemented and appropriate for their intended use.
A model may produce precise results while relying on weak assumptions, unsuitable data or implementation errors. We provide independent challenge of model design, data inputs, performance and limitations, with the scope tailored to the model’s purpose and materiality.
Our review combines documentation assessment, quantitative testing and discussion with model owners. Clients receive a validation report that distinguishes critical issues from improvements, explains the implications and sets out a practical remediation plan.
Steps and deliverables
7 steps, in order. The scope of each is agreed at the start.
Model inventory and scope confirmation
We confirm which models are in scope, what each is used for and how material it is.
Conceptual and documentation review
We challenge the model’s design and assumptions against its documentation and intended use.
Data and implementation testing
We test the input data and check that the model is implemented as designed.
Performance and sensitivity testing
We test how the model performs and how sensitive its results are to key assumptions.
Findings classification
Each finding is classified, so critical issues stand apart from improvements.
Validation report and remediation priorities
A validation report that explains the implications and sets out a practical remediation plan.
Follow-up review, where agreed
Where agreed, we return to check that the remediation has worked.
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