Across the financial sector, model risk management is no longer just a regulatory obligation; it’s a strategic imperative. As financial institutions face rising pressure from regulators and the growing complexity of AI, one area that has emerged as particularly difficult to get right is model documentation.
Experian recently conducted a global study of 511 financial institutions in the United States, the United Kingdom, and Brazil to explore how firms are navigating this challenge.
Regulatory requirements are increasing
According to our research, 95% of financial institutions report a rise in the number of regulations they need to comply with. Nearly seven in ten expect regulatory changes to increase even further over the next two years.
What’s changing isn’t just the volume of regulation, it’s the frequency and specificity of regulatory feedback. 79% of institutions say supervisory concerns from regulators have increased, often requiring immediate attention or formal remediation plans.
This is not just a compliance issue. When documentation is unclear or inconsistent, it raises doubts about the model itself. This leads to rework, slower approvals, and reputational risk.
Manual processes are still the norm
Despite these rising pressures, 60% of institutions still rely entirely on manual processes for model documentation, involving an average of 29 people. Larger institutions report 50 or more individuals involved across teams.
This approach is time-consuming, error-prone, and unsustainable. Regulatory requirements evolve constantly, and manual documentation simply cannot keep pace. Financial institutions report spending up to one-third of their time on documentation tasks that could be automated.
Hybrid tools aren’t enough: Businesses need end-to-end automation
Many firms have tried to tackle the challenge with partial automation, but these approaches are falling short. 68% of respondents say their current technology doesn’t meet compliance needs, and most still require manual effort to stitch together outputs from multiple tools.
The research found that 28 different third-party tools are being used by respondents, often fragmented and duplicated. What’s needed is an integrated solution across the full model lifecycle and can produce regulator-ready documentation.
The future is automated
Recognising a need for change, 87% of respondents plan to implement automated model documentation within the next two years, with a near-even split between third-party solutions and internally developed tools. But automation alone isn’t the answer.
Success requires strong data foundations, responsible AI frameworks, and modern governance. Financial institutions are prioritising improvements in three key areas over the next 6–12 months:
What can financial institutions do now?
To meet these challenges, businesses must shift from tactical fixes to strategic transformation:
- Establish clear documentation standards across model types
- Embed explainability and responsible AI principles
- Enable seamless handoffs between model developers and validators
- Modernise operations to reduce time-to-market and regulatory risk
Download the full report now to understand how the compliance landscape is evolving, and what your business can do about it
