Risk Management Guidance for AI and Machine Learning Models

This white paper addresses the application of model risk management (MRM) guidance to artificial intelligence (AI) and machine learning (ML) models in the financial services sector. It outlines the increasing adoption of AI/ML technologies for compliance and risk functions, such as fraud detection and trade manipulation. The paper discusses whether existing MRM guidance remains relevant for these models and how it should be interpreted. It emphasizes that while AI/ML models possess unique characteristics, the broad, principles-based MRM guidance can still serve as an appropriate framework for managing risks associated with Risk AI/ML models. The document offers specific observations and recommendations, including the importance of risk assessment, safety and soundness, model documentation, industry standards, and governance controls. It highlights the necessity for regulators to clarify expectations and support the development of standards to ensure effective risk mitigation practices.