Darling Consulting Group (DCG) is a recognized leader and premier provider of risk management consulting and independent OCC 2011-12 and SR 11-7 regulatory-compliant model validation services to large financial institutions.
For over the past 30 years, clients of all sizes have benefited from our expertise as model practitioners and validators—including many of the largest financial institutions in the U.S. and Canada.
DCG is proud to provide independent, third party model validation services that our clients rely on not only to cover regulatory requirements but also to help them construct best-in-class models aiding in the development and confirmation of risk management strategies and strategic planning.
DCG’s Quantitative Risk Analysis & Strategy Group provides specialized OCC 2011-12 and SR 11-7 regulatory-compliant model validation services for a variety of financial risk models. Whatever challenges you face, our DCG team has the experience and expertise to collaborate with your internal model risk management and audit teams and provide the independent perspective needed to develop best-in-class risk assessment and management practices.
As part of DCG’s comprehensive DFAST and CCAR Credit Stress-Testing Model Validations, we provide an independent evaluation of the statistical approaches employed to project credit losses for the Federal Reserve macroeconomic scenarios (and any additional idiosyncratic or bank-specific scenarios). In addition, we provide confidence that the identified risk algorithms are being appropriately applied and credit losses are being properly captured and reflected within the stress-testing framework. Our experience in this validation space gives us a substantive horizontal viewpoint of the relative success of in-house and outsourced statistical methods employed and the variety of approaches to model architecture, systems integration, documentation, executive and regulatory reporting, governance and processes and controls.
Credit Model Validation
Effective credit risk management is built upon a foundation of solid models and metrics that calculate the riskiness of borrowers at both the individual and portfolio levels. DCG’s Credit Model Validation provides a comprehensive review of the PD and LGD methodologies at your institution, including assessments of the input data, statistical techniques, model outputs and risk rating procedures. Model validation also encompasses back testing and benchmarking analyses to evaluate the effectiveness and stability of your credit models. Our experience will help you ensure that your credit model results are reliable for conducting the many other functions—such as allowance setting and bottom-up stress testing—that depend on the accurate estimation of your borrowers’ credit risk.
ALM Model Validation
DCG provides a comprehensive Asset Liability Model Validation service that includes data and data management, model construction and configuration, third-party model integration, assumption development and support (including sensitivity and stress testing), scenario management, output, procedural documentation and governance. In addition, we can assess the effectiveness of your ALCO reporting and risk management-related policies. Clients have long appreciated not only the strategic insights resulting from our validations but also their ability to accurately predict regulatory inquiry.
Liquidity Risk Review
Our Liquidity Risk Reviews range from standalone model validations to encompassing validations of your entire liquidity risk management process to ensure effective measurement and management of your ongoing and contingency funding needs. As part of our in-depth evaluation, we can examine the liquidity forecasting process including assumptions, stress-test parameters, key risk indicators, as well as your documented liquidity contingency policies, procedures and plan.
Allowance for Loan & Lease Losses (ALLL) Model Validation
ALLL models come is a variety of shapes, sizes and levels of complexity. DCG’s ALLL Model Validation service is tailored to assess models ranging from simple spreadsheet-based constructs to more sophisticated roll-rate and loss-migration models. In addition to confirming your model’s performance and reliability, DCG’s ALLL Validation service includes an evaluation of the assumption development and support process, the applicability of management overlays and the sufficiency of the ALLL model-related processes and controls.
Operational Risk Model Validation
For institutions that assess their capital requirement for operational risk using the Advanced Measurement Approaches (AMA) framework outlined in the OCC 2011-21/ Federal Reserve SR 11-8 regulatory guidance, we provide a comprehensive validation solution that includes an evaluation of the data management and transformation processes applied to internal and external loss event data, the statistical methods and tests employed for loss frequency and severity estimates, scenario analysis, the Business Environment and Internal Control Factors (BEICF), back-testing and outcomes analysis and the related processes and controls.
Read DCG Managing Director Mike Guglielmo’s Model Risk Management Meets 3 Lines of Defense article.
Other Specialized Risk Management Consulting Services
DCG has the experience and resources to provide your institution with the help it needs in a wide array of risk measurement and management areas including statistical modeling, stress testing, behavioral studies, governance, board education, financial performance, risk mitigation, capital planning, strategic planning and model risk management.
About DCG’s Large Bank Validation Team
DCG’s team of validation experts is comprised of a select group of highly experienced quantitative risk management model developers and validators, data management and documentation specialists, former examiners and governance experts and model risk management professionals. Collectively, this team represents an abundance of knowledge and experience.