Model risk mitigation and cost reduction through effective design

The purpose of this paper is to shed light on how certain design choices in the model development process - in particular, choices in the design of the model production system - can significantly reduce model risks with minimal investment. By considering these recommendations during the model design stage, not only can a company reduce a model's overall risk profile and, therefore, the likelihood of model error, it can also reduce the costs associated with model validation, documentation, maintenance, and operational controls (such as SOX 404 controls).