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HW Group Supporting organisations delivering on strategic Model Risk Management requirements

6th Jul 2023

The Prudential Regulation Authority (PRA) has recently released a ‘Supervisory Statement’ (SS) – SS1/23 (released 17th May 2023) that sets out the PRA’s expectations for banks’ management of model risk. The desired outcome of this SS is that banks take a strategic approach to Model Risk Management (MRM) as a risk discipline in its own right. The PRA’s expectation is that all regulated UK-incorporated banks, Building Societies, and PRA-designated investment firms will calculate regulatory capital requirements for either credit risk (Internal Ratings Based approaches), market risk (Internal Model Approach), or counterparty credit risk (Internal Model Method).

The expectations for the banks are in the form of five principles considered key to implement a robust MRM framework and to manage the risk effectively across all model and risk types. The principles are intended to support firms to strengthen their policies, procedures, and practices to identify, manage, and control the risks associated with the use of models.

The 5 Principles include: 1. Model identification and model risk clarification 2. Governance 3. Model development, implementation and use 4. Independent model validation 5. Model risk mitigants. This has resulted in Risk, Model and Credit Risk teams scrambling to ensure they have enough resource to ensure these requirements are adhered to and the banks output is aligned with the scale of the business.

Director at HW People, Rachel Frankland comments: “We are seeing an increased demand in interim resource in this area as organisations, focussed on bringing in experienced talent to manage the process, look to deliver on these Model Risk Management requirements in the shortterm. Candidates with this skillset are in huge demand from organisations who are urgently trying to shape their transformation process and build out their teams to adhere to recent changes. This will no doubt have a knock-on effect – creating a steep inflation in both day rates and permanent salaries.” 

If you would like any market insight or require support with talent attraction in this area, please get in touch:


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