RMA’s 2021 MVC Vendor Survey is in the field and already providing intriguing insights into how banks engage vendors for model validation.
Contracting a third-party validator who can effectively work with both the bank and the model vendor is an option for many banks. But validating each vendor model comes with a price. According to early results from the MVC survey, Banks typically pay $75,000 or more to fully validate modeling frameworks such as BSA/AML and CECL, making cost the biggest obstacle when considering third-party validations.
Documentation is another challenge for banks. Survey respondents said they often found vendor documentation to be either too weak or too technical. And while vendors do provide documentation which demonstrates the model is fit for purpose, some vendors do not provide clients with complete documentation due to intellectual property concerns.
Participating model risk managers offered other concerns through the survey, including the quality of the validation itself and internal issues such as legal clearance and length of time to onboard vendors.
What are your biggest challenges when considering vendors? Share your experiences at our inaugural Model Risk Management Summit, Dec 1 and 2. We will provide a survey update during the “Vendor Risk Management Expectations” panel, when Evan Sekeris, Head of Model Validation for PNC, will moderate a conversation with Christe Smith, Director of Third Party Risk at Bank OZK, and Aaron Benson, Senior Risk Officer at Zions Bancorp. Register now for the Model Risk Management Summit.