Some 68% of financial services professionals believe regulators will become increasingly focused on model risk management.
A survey of 118 financial services professionals around the world found the top three reasons for regulators' increased focus were concerns around systemic risk, data policies and processes, and a growing number of instances of incorrect data, leading to market corrections.
Data management firm ClusterSeven said there was a trend of increased regulation and it gave the example of Dodd-Frank Act Stress Testing (DFAST) in the US. An updated version of DFAST comes into force this year and includes additional reporting procedures covering model risk and integrity controls.
Ralph Baxter, CEO at ClusterSeven, said: "The term model risk is becoming a unifying theme for many aspects of operational risk in financial reporting, such as data governance, spreadsheet management and expert judgement.
"Conventional approaches to model risk management are struggling to keep up with the need to inventory many thousands of data, processing and reporting components - usually in the hands of business users - and to do this for the different needs of individual business departments. The need for much more flexible solutions is clear."
In a previous study, the firm said 79% of respondents stated high dependency on models posed a "significant business risk" to financial institutions. The firm felt it was unsurprising that the majority (82%) of financial services professionals expected spending on compliance and risk to increase over the next three years.
