Risk description Key controls and risk mitigation Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. Model risk includes model design error, model usage error and data and other input limitations. CFSL has a number of models which cover credit models, e.g. Probability Default, Loss Given Default, Exposure at Default, to compute the expected credit loss in line with IFRS 9 and the credit scorecards which are used for credit decision-making. • Credit scorecards performance is regularly reviewed and reported at the Risk Analytics Forum. • Performance of IFRS 9 ECL models is monitored and any issues are reported to the Risk Management Committee. • Models are reviewed and updated to reflect the latest performance and latest macroeconomic forward-looking variables. • IFRS 9 ECL models are independently maintained by the Risk Management team. • Detailed model documentation and ECL standards, including the governance as approved by the Board, are in place. Key developments • IFRS 9 ECL models have been updated with the latest dataset in 2023 to consider the most recent performance and latest macroeconomic forward-looking variables. Model risk 65 OUR YEAR AT A GLANCE OUR PEOPLE GOVERNANCE FINANCIAL STATEMENTS
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