Model Risk

Financial institutions and multinationals rely on models to price instruments, measure risk and allocate capital. Supervisors and risk officers increasingly expect firms to manage the risk that these models are flawed, mis-used or poorly governed – a discipline known as model risk management.

Embridge provides independent validation and review of models used across the balance sheet, including:

• Pricing and valuation models for intangible and financial assets
• Counterparty credit risk and xVA models
• Market risk models, including expected shortfall and sensitivities-based approaches under FRTB
• IRRBB models covering EVE, NII and behavioural assumptions

Our reviews assess conceptual soundness, mathematical implementation, data quality, calibration, benchmarking, performance monitoring and documentation. We work within the expectations of TRIM, SS1/23, SR 11-7 and equivalent frameworks, and our findings are structured to support remediation planning and supervisory dialogue.

A well-executed independent review strengthens the evidentiary basis for model use and reduces the likelihood of supervisory challenge.