The Model Inventory as an Enterprise Risk System: Auditing the Completeness, Accuracy, and Data Lineage of the Firm-Wide Model Catalog and Its Integration with Risk Aggregation

Authors: Puneet Redu

DOI: https://doi.org/10.37082/IJIRMPS.v13.i6.232882

Short DOI: https://doi.org/hbkqnm

Country: United States

Full-text Research PDF File:   View   |   Download

Abstract: The scale and complexity of quantitative modeling within modern financial institutions have transformed the model inventory from a static compliance register into a foundational component of enterprise risk management. This paper reframes the firm-wide model inventory as an enterprise risk system, essential to effective governance under supervisory frameworks such as SR 11-7 and the Basel Committee’s principles for risk data aggregation, and demonstrates that treating the inventory as a passive compliance register introduces structural blind spots that can materially undermine enterprise risk aggregation and capital reliability. This paper develops an audit-grade analytical framework for assessing inventory completeness, classification accuracy, and end-to-end data lineage, and examines how deficiencies in these dimensions propagate into failures of risk aggregation and capital adequacy assessment. The paper further explores technical mechanisms for identifying undisclosed or “shadow” models, architectural requirements for real-time lineage traceability, and the mathematical sensitivity of aggregate risk measures to data quality errors. By integrating the model inventory directly with enterprise risk aggregation frameworks, institutions can convert inventory governance from a compliance obligation into a control mechanism for systemic risk transparency.

Keywords: Model Risk Management, SR 11-7, BCBS 239, Data Lineage, Risk Aggregation, Enterprise Risk Management, Shadow Models, Economic Capital.

Paper Id: 232882

Published On: 2025-12-18

Published In: Volume 13, Issue 6, November-December 2025

Share this