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All glossary terms

Regulation & risk

Model Risk Management (MRM)

Model risk management (MRM) is the process of identifying and controlling risks that arise when a model is developed, implemented, or used to inform decisions. It can include independent review, testing, documentation, monitoring, and governance appropriate to the model’s role.

Also known as MRM.

Why it matters in practice

A model may be technically correct yet misused, poorly implemented, or unsuitable for a particular decision. MRM helps organizations make assumptions, limitations, and oversight visible. Practices vary across industries and frameworks, so a model-risk label should not be mistaken for a universal regulatory rule.

Example

A reviewer checks a forecasting model’s assumptions, implementation, and performance monitoring before the business relies on its output.

Educational note

This definition is general information, not legal advice. It may omit facts that matter to a specific situation and does not establish or guarantee compliance.