A model risk team is evaluating whether a new AI system constitutes a 'model' under SR 11-7 or a 'business tool.' The system applies rules-based logic developed by domain experts to route customer inquiries. What conclusion is MOST defensible?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Here's the deal — b is correct because SR 11-7 distinguishes models (which apply quantitative estimation to transform inputs into risk-influencing outputs) from tools (which apply fixed expert rules or lookup tables). A purely rules-based routing system may fall outside strict model scope, though risk-based judgment — not a rigid rule — should determine governance treatment given materiality.
Full explanation below image
Full Explanation
B is correct because SR 11-7 distinguishes models (which apply quantitative estimation to transform inputs into risk-influencing outputs) from tools (which apply fixed expert rules or lookup tables). A purely rules-based routing system may fall outside strict model scope, though risk-based judgment — not a rigid rule — should determine governance treatment given materiality. A is overbroad. C is overbroad. D has no basis in SR 11-7.