We created our own CECL software, so we have a unique expertise when it comes to evaluating other CECL models. The complementary nature of model creation and model validation mean that we can benchmark against other models quite easily, exposing potential weaknesses that could create a liability.
Model Validation Team Leadership
Model validation is a crucial part of your risk management process, and financial institutions often benefit from the neutral perspective of an outside validator. Valuant offers an unbiased review that's independent of your internal processes.
Valuant follows SR11-7 as well as your bank’s model validation guidelines.
Why choose Valuant?
Valuant stands apart from our competitors: we have extensive experience building models from the ground up, which gives us a unique advantage when it comes to testing and probing models. Having our own models for many key functions we are in a unique position to provide an independent benchmark for in-house/vendor models used at your institution.
- Our experienced team includes former risk management experts from the Big 4 consulting firms, community banks and larger financial institutions, giving us a great range of perspectives to draw from.
- We are a trusted outside voice that isn’t biased by what’s happening inside your organization.
- Our assessment is tailored to each institution, to better address the unique risk factors of each model.
- We are transparent about our processes and methodology, working together with your team to provide actionable information.
What models do we validate?
Valuant's team has validation expertise in most of the functional areas in a financial institution. We can help you prioritize and scope models to be validated while keeping budget in mind. We offer a blended rate, so that as our relationship grows, you’ll benefit from even deeper discounts.
- Credit and Counterparty Risk
- PD, LGD, EAD
- Risk Rating Exposure and CVA
- Market and Liquidity Risk
- Asset Liability Management
- Value at Risk (VaR)
- Expected Shortfall
- Portfolio and Financial Risk
- Capital Forecasting
- Stress Testing
- Econometric Models
- Decision Support and Marketing
- Marketing Models
- Client Targeting Models
- Credit Underwriting
- Valuation and Pricing
- Pricing Models
- Valuation Models
- P&L Attribution
- Cash Flow/NPV/Ration Analysis
How does the validation process work?
After a kickoff with the team where we'll review scope, approach, roles, and expectations, we'll move through the following steps:
- Assess both internal and external data for appropriateness, completeness, accuracy, data cleaning (extreme values), and sampling.
- Assess conceptual soundness, including model design, appropriateness for model use and business purpose, segmentation, assumptions and limitations, and compensating controls where necessary.
- Replication and code testing, where possible; model fit; input-output testing; confirmation that the model does what it claims.
- Outcome analysis, including statistical tests, parameter stability, sensitivity analysis, backtesting and/or benchmarking.
- Implementation testing, which shows whether production data, platform, and processing are accurate with sufficient controls in place.
- Understand whether key stakeholders were involved in all modeling decisions and have approved the model.
- Ensure documentation is comprehensive and complete.
- Assess whether performance monitoring plan exists and performance thresholds have been set.
What is the final deliverable?
We will have iterative meetings with your team to review our findings. After that, we will prepare a final validation report with all our recommendations that can be shared with the model owner for response. Our validation report will be written following model validation template adopted by your institution. You'll have peace of mind knowing that your model has been fully tested and validated by independent experts.