Model Risk Management in the Age of AI

2026

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AI-generated summary

1) Model Risk Management must evolve from periodic validation to continuous governance to address the opacity, stochasticity, and autonomy introduced by AI systems.
2) This paper outlines a governance-centric MRM paradigm, proposing practical controls such as dynamic guardrails, real-time monitoring, and human-in-the-loop oversight for AI systems in regulated financial domains.
3) It also explores the evolution of models across three generations and presents a case study of Moody's Early Warning System to demonstrate operationalizing MRM for AI.
Tags: AI, Model Risk Management, Governance, Continuous Monitoring, Financial Services

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