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Transforming Model Risk Management: A Game-Changing Approach

In today’s rapidly evolving financial landscape, model risk management has become imperative for institutions like America First Credit Union (AFCU). With a commitment to customer satisfaction and a vast member base spread across multiple states, AFCU faced unique challenges in scaling their model risk management practices. In response, they embarked on a transformative journey that hinged on the adoption of cutting-edge technology. In this success story, we delve into how AFCU overcame these challenges and achieved remarkable results with the help of our partner’s Yields MRM, a technology-driven solution that streamlined their operations and elevated their model risk management to new heights.

AFCU: A Financial Powerhouse with Model Risk Challenges

AFCU is no stranger to the complexities of the financial world. As the sixth-largest credit union in the United States, boasting $12 billion in capital assets and serving approximately one million members across several states, AFCU is deeply committed to offering a wide array of banking services. These services encompass high-yield savings accounts, mortgages, car loans, and credit cards, all of which rely on intricate models for functions like credit scoring, loan approval, and capital planning.

While many of these models were developed in-house, AFCU leaned on external consultants for periodic validation. However, as the credit union’s Model Risk Management (MRM) activities expanded, a multitude of challenges emerged. The fragmentation of model risk processes impeded collaboration among teams, leading to inefficient exchanges between model development and validation teams. Additionally, the lack of a centralized platform for model-related information hindered visibility for AFCU stakeholders, resulting in project delays and audit complications. Recognizing the need for a streamlined and centralized MRM solution, AFCU sought out a technology-driven answer to their model risk management woes.

The Solution: Yields MRM Platform

After a thorough evaluation and market research, AFCU chose the Yields MRM platform to revolutionize their MRM practice. The platform’s modular design allowed AFCU to start by implementing the ‘Model Catalog’ and ‘Workflow Engine’ modules. The Model Catalog empowered AFCU to catalog all models and trace their metadata and events, while the Workflow Engine orchestrated various business processes with task and alert functionalities, fostering teamwork and timely delivery of results.

AFCU’s decision was heavily influenced by the platform’s scalability and flexibility, crucial for an institution where models span multiple business units. The ability to configure the solution without the need for coding and dynamically adapt it to evolving internal and external requirements addressed this need perfectly. Moreover, the solution’s user-friendliness empowered the business team to take full ownership, eliminating dependencies on internal IT or vendor support for modifications.

Transformation and Results

The adoption of the Yields MRM platform brought about a sea change in how AFCU conducted model risk management. Enterprise-wide access to the solution revolutionized the process, facilitating controlled user access while promoting standardization in data collection and process execution. This not only mitigated the risks of inconsistency due to diverse validation approaches but also enabled model risk management to scale efficiently across various models and business units. With streamlined business processes, sign-offs, and a comprehensive audit trail, empowered AFCU to proactively manage model risks, bolster compliance, and enhance operational efficiency.

The implementation process was meticulously planned and executed in a matter of weeks, with the Customer Success Team working closely with AFCU to set up user roles and permissions, as well as workflows for model validation and monitoring. With the first users now operational, AFCU plans to expand the platform’s usage, onboarding users from various departments, and further optimizing their model risk management practices.

Achieving Remarkable Results

The adoption of Yields MRM has yielded significant results for AFCU:

  1. Faster Turnaround Time: By streamlining processes and enhancing collaboration, AFCU has reduced the time required for model risk management tasks, enabling quicker decision-making.
  2. Improved Compliance and Operational Efficiency: The centralized approach has enhanced compliance adherence and operational efficiency, reducing errors and delays in model validation.
  3. Centralized MRM Activities: AFCU now enjoys a centralized platform for all model-related information, providing stakeholders with clear visibility into model risks across departments.
  4. Enhanced Communication and Collaboration: The solution has improved communication and collaboration among model development and validation teams, fostering a more cohesive working environment.

In conclusion, America First Credit Union’s success story exemplifies how technology-driven solutions like Yields MRM can empower financial institutions to scale their model risk management practices efficiently. By embracing modularity, scalability, and flexibility, AFCU has set a benchmark for excellence in the dynamic world of model risk management, reaffirming its commitment to serving its members with the utmost professionalism and efficiency. Learn more about this initiative here.

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