Model Governance in an Open-Source World
Part 2: Roles in a Model Governance Framework
There are different roles in a model governance framework focused on code changes. The model governance framework is a stage for a play, and the success of the play depends on the brilliance of the actors in the starring roles identified in this section.
The model approvers are tasked with the responsibility of approving changes to model code and model assumptions. They are senior managers who own the assumption-setting and reporting processes. All changes to models must be warranted, peer reviewed, documented and analyzed before being presented for approval. It may be optimal to have more than one group of model approvers, depending on their expertise and the nature of the change. For example, it may be necessary to have a group approve changes to model code that is distinct from the group that approves model assumptions.
Model developers are authorized to change model code and assumptions. Their expertise is in the source code and product knowledge. All code changes are completed per coding standards. The impacts to model results are quantified, validated, analyzed, independently tested and peer reviewed, and documented. The model developers are a center of excellence in the company. They work on model changes at the request of sponsors and will often present their work to the model approvers for approval.
Model users are those who use the model results for reporting and analysis purposes. They are responsible for valuation, pricing,
generally accepted accounting principles (GAAP) reporting, embedded value reporting, forecasting and so on, as well as for the accuracy of the results produced by the models. They work closely with the model developers. Model users submit the majority of the requests for changes to models and are often heavily involved in the peer review of the work products before they are installed to production.
The gatekeeper is the guardian of the production models. The gatekeeper works closely with the model steward to make sure that only approved model changes enter the production zone. A predominant aspect of this role is the archiving of older production versions before replacing them with the latest version from the staging zone, and making sure the new versions perform as specified. The gatekeeper ensures the correct model is installed to the production environment.
The model steward stars in the leading role, making sure everyone adheres to the model governance framework. The major responsibilities of the model steward include making sure the model change control process works smoothly by facilitating approver meetings, scheduling and maintaining a list of all model change requests, prioritizing model change requests and working with all parties to ensure an optimal solution is reached for each request. The model steward is expected to have a good appreciation and understanding of the open-source software. Project management skills are a must for this role.
Sponsors of Model Change
The sponsors of model changes are usually senior management responsible for financial reporting areas such as valuation, GAAP or pricing. They work with the model steward to schedule requested changes to models. The sponsors are tasked with making sure their requested model changes are implemented accurately as specified.
Rohan N. Alahakone and Dorothy L. Andrews | The Actuary | June/July 2018
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