COMPEL Glossary / model-risk-management-mrm
Model Risk Management (MRM)
Model Risk Management is a governance discipline originating in financial services that provides structured approaches to validating, documenting, monitoring, and governing AI/ML models used in decision-making.
What this means in practice
MRM was codified in the U.S. Federal Reserve's SR 11-7 supervisory guidance, which requires financial institutions to maintain independent model validation, comprehensive documentation, and ongoing monitoring for all models that inform material business decisions. While originally a financial services requirement, MRM principles are increasingly adopted across industries as AI governance best practice. MRM encompasses model inventory management, independent validation before deployment, ongoing performance monitoring, periodic revalidation, and formal model retirement processes. In the COMPEL framework, MRM practices align with Domain 17 (Risk Management) and the model lifecycle management capabilities assessed in Domain 7 (MLOps).
Related Terms
Other glossary terms mentioned in this entry's definition and context.