A model owner argues that a newly developed neural network model do…

Question

A model owner argues that a newly developed neural network model does not require formal model risk management treatment because it assists decisions but humans make the final call. How should a model risk officer respond?

Accepted Answer

Disagree — SR 11-7 applies to models whose outputs materially influence decisions, regardless of whether a human makes the final call — Here's the deal — b is correct because SR 11-7 explicitly applies to models whose outputs inform or materially influence business decisions, even when humans retain final decision authority — the presence of human review does not remove the model from model risk management scope. A misreads SR 11-7.

Answer

Agree — SR 11-7 only applies to fully automated decision-making systems

Answer

Agree — neural networks are exempt because they cannot be validated using traditional statistical methods

Answer

Disagree — but only if the model processes more than one million records annually

A model owner argues that a newly developed neural network model does not require formal model risk management treatment because it assists decisions but humans make the final call. How should a model risk officer respond?

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