Model Risk Management
Definition
Model Risk Management (MRM) is the financial services discipline of identifying, measuring, monitoring, and controlling the risks introduced by predictive and AI models. SR 11-7 in the U.S. and similar frameworks globally formalize MRM requirements.
Why it matters
The business case for Model Risk Management.
MRM is becoming the de facto standard for AI governance across regulated industries, not just banking. Understanding MRM principles is increasingly required for any enterprise AI deployment.
Related terms in AI Governance & Sovereignty
AI Governance Framework
An AI Governance Framework is the operational system, not the policy document, that makes AI decisions auditable, compliant, and accountable. It includes data governance, model governance, decision governance, incident governance, and compliance governance.
AI Sovereignty
AI Sovereignty is the principle that an organization should own and control its AI systems, data, and intellectual property, not rent them from a vendor. Sovereignty spans data, model weights, infrastructure, and operational knowledge.
AI Compliance
AI Compliance is the practice of ensuring that AI systems meet applicable regulatory, legal, and industry-specific requirements, including the EU AI Act, GDPR, HIPAA, SOC 2, and sector-specific frameworks like model risk management in financial services.
Data Lineage
Data Lineage is the documented record of where data comes from, how it has been transformed, and where it is used, including by AI systems. Complete data lineage is foundational to AI governance and compliance.
AI Audit Trail
An AI Audit Trail is a complete, immutable record of every AI decision and the data, model version, and context that produced it. Audit trails are required for regulated industries and best practice everywhere.
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