A model risk officer receives a report showing that a production model's Gini coefficient has declined from 0.72 to 0.54 over 18 months. What action is MOST appropriate under standard model risk management practice?
Select an answer to reveal the explanation.
Short Explanation
When a production model's Gini drops from 0.72 to 0.54, you're looking at an 18-point loss of discriminatory power, so you escalate to the model risk committee and trigger an out-of-cycle validation. Waiting for the next annual review is too slow, and you don't decommission or retrain before validation.
Full Explanation
Escalating to the model risk committee and triggering an out-of-cycle validation is the appropriate action. A Gini decline from 0.72 to 0.54 is an 18-point loss of discriminatory power and material degradation, and SR 11-7 requires this for models with significant performance deterioration. Documenting the decline for the next annual validation is insufficient given the magnitude. Immediately decommissioning and reverting to manual processes is premature without investigation. Retraining using only the most recent six months may be remediation, but it should follow validation, not precede it.