What is Model Risk?

Model Risk

Intrinsic Model Risk is a challenge with every risk system. The more complex the model, the higher the potential model risk.

Extrinsic Model Risk, caused by input data errors and model configuration mistakes, can compound model risk significantly and cause severe distortions to risk optics.

Model Risk Mitigation

Red Swan's consulting experts deploy our software solutions to configure risk models and processes for optimal performance.

By minimizing Extrinsic Model Risk, Red Swan improves the veracity and confidence of risk reporting.

Ongoing Challenge of Model Risk Management

Maintaining optimal performance requires constant vigilance and responsiveness to prevent excessive model risk from creeping back into reports.

Red Swan services provide ongoing maintenance, monitoring, diagnostics, and timely mitigation required to manage model risk effectively.

Model Risk
Model Complexity
Extrinsic Model Risk
Extrinsic Risk is model risk that can be controlled. With careful analysis and proprietary software, Red Swan experts mitigate model risk and monitor against its return.
Intrinsic Model Risk
Intrinsic Risk is model risk inherent in any risk system. Properly configured models should be as close to this level of model risk as possible. Red Swan makes it easier to accomplish.
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