Model Validation

If you’re working in an environment where the possibility of financial loss is always present, thorough risk management is vital. At ING Model Risk Management manager Alejandro Gomez focuses on understanding and improving ING’s risk models making a better bank.

“The best business decisions need the best models and regulatory compliance imposes high standards,” says Alejandro. “More so when models define the outcome: financial loss/gain or negative/positive societal impact.”

Scenario approach

Brexit, mortgage drops, disease epidemics, political tensions and even day to day market changes: there are many (future) scenarios that turn a performing model into an inaccurate one. It’s up to Alejandro and his team to detect any shortcomings in the risk models. “In the end we need to understand the risk we take and hold a prudent amount of capital to stay liquid and comply with regulations. Accurate and conservative models help us to be one step ahead. On the other hand: we could save it all, but we also need sufficient reservations to support our growth.”

Manage the unexpected

To make the right decisions Alejandro oversees the model risk of the different trading risk models. “Risk models predict the amount ING can lose every day using probability and statistics to summarize the risk in the trading portfolio. Other risk tools are also under the scope of model validation, such as stress testing and event risk. What can happen? How likely is it that it will happen? And what are the outcomes if something occurs? We are responsible for challenging the models. With pre-approval and periodical validations we are constantly monitoring the risk in the risk models.”

Global collaboration is key

ING’s trading risk portfolio is global and teams collaborate worldwide. The trading risk model validation in Amsterdam oversees all risk models in the trading portfolio. “Regulations differ by country so models need to adapt to comply with international and national standards. Models have limits and markets are different therefore close collaboration with ING’s global and local risk managing teams is necessary. As a senior I make sure we’re moving together, together we maximise the results.”

Never dull

ING’s Trading Risk model validation team is unique. We are well rounded, with strong tech, quantitative and soft skills. “You have to understand both the technical models and communicate effectively with stakeholders. This two-fold challenge is one of the reasons I enjoy my day-to-day job so much. In the team, I strive to make each other to be successful. Empowering people is very natural to me, as a team we make things happen.”