Role-Specific Domain Knowledge Exercises

Objective:

Learn to craft effective prompts for researching and synthesizing emerging trends in model risk management.

Background:

Model Risk Managers must stay current with evolving regulatory expectations, industry practices, and emerging risks related to new modeling techniques.

Exercise:

1. Scenario:

You need to prepare a comprehensive briefing on emerging model risk trends for your institution's Model Risk Committee.

2. Basic Prompt Example:

What are the latest trends in model risk management?

3. Prompt Improvement Activity:

• Identify the limitations of the basic prompt (lack of specificity, context, and structure)
• Add details about your specific areas of interest and institutional context
• Specify the time frame and sources to consider
• Request a structured analysis with specific components and insights

4. Advanced Prompt Template:

I need to research emerging trends in model risk management for a quarterly briefing to our Model Risk Committee at a [size/type] financial institution. Please help me identify and synthesize key developments over the past 6-12 months.

Areas of specific interest:
- Regulatory expectations and guidance updates
- Industry best practices evolution
- Emerging risks related to AI/ML models
- Model risk management for alternative data
- Third-party model risk management approaches
- Model risk quantification methodologies
- Model risk governance enhancements
- Model monitoring innovations

Institutional context:
- Mid-sized financial institution with traditional and digital banking services
- Model landscape includes credit, market, operational, and financial models
- Growing adoption of machine learning techniques
- Increasing use of vendor models and third-party analytics
- Current focus on enhancing model monitoring capabilities
- Preparing for upcoming regulatory examinations

Please research and synthesize information from:
- Recent regulatory publications and speeches
- Industry white papers and thought leadership
- Academic research and publications
- Conference presentations and panel discussions
- Consulting firm insights and surveys
- Financial industry news and analysis

For each identified trend, please provide:
1. Concise description of the trend or development
2. Key drivers and catalysts
3. Regulatory implications and expectations
4. Industry adoption status and examples
5. Potential impact on our institution
6. Implementation considerations and challenges
7. Recommended next steps or actions
8. Credible sources and references

Format your response as a comprehensive briefing document with an executive summary, detailed analysis of each trend, and a conclusion with prioritized recommendations. Include a bibliography of sources.

IMPORTANT: Focus on factual information from credible sources. Clearly distinguish between established trends, emerging developments, and speculative predictions. Provide specific citations for key information.

5. Evaluation Criteria:

• Does the prompt clearly specify the research purpose and audience?
• Does it provide sufficient context about areas of interest and institutional situation?
• Does it request information from diverse, credible sources?
• Does it ask for structured analysis with actionable insights?
• Does it include guidance on distinguishing facts from speculation?

6. Practice Activity:

Create your own advanced prompt for researching domain knowledge related to:

1. Regulatory expectations for AI/ML model validation
2. Model risk management for climate risk models
3. Quantum computing implications for financial models

Objective:

Learn to craft effective prompts for researching and identifying emerging risks that could impact your financial institution.

Background:

Risk Officers must continuously scan the horizon for new and evolving risks that could affect the organization's strategic objectives and risk profile.

Exercise:

1. Scenario:

You need to prepare a comprehensive analysis of emerging risks for an upcoming Enterprise Risk Committee meeting.

2. Basic Prompt Example:

What are the emerging risks for banks?

3. Prompt Improvement Activity:

• Identify the limitations of the basic prompt (lack of specificity, context, and structure)
• Add details about your institution's profile and risk exposures
• Specify the time horizon and risk categories of interest
• Request a structured analysis with specific components and insights

4. Advanced Prompt Template:

I need to research emerging risks for a quarterly Enterprise Risk Committee briefing at a [size/type] financial institution. Please help me identify and analyze potential emerging risks over a 12-24 month horizon.

Institutional profile:
- [Size/type] financial institution with [retail/commercial/investment] banking focus
- Geographic presence in [regions/countries]
- Key business lines include [lending, deposits, wealth management, etc.]
- Current strategic initiatives include [digital transformation, market expansion, etc.]
- Existing risk concentrations in [sectors, geographies, products]

Risk categories of interest:
- Macroeconomic and geopolitical risks
- Credit and counterparty risks
- Market and interest rate risks
- Operational and technology risks
- Regulatory and compliance risks
- Strategic and business model risks
- Environmental and climate-related risks
- Cyber and information security risks
- Conduct and reputational risks

Please research and analyze emerging risks from:
- Economic forecasts and financial market analyses
- Regulatory publications and speeches
- Industry risk reports and surveys
- Academic and think tank research
- News analysis and expert commentary
- Peer bank risk disclosures

For each identified emerging risk, please provide:
1. Clear risk statement and description
2. Potential triggers and transmission mechanisms
3. Likelihood assessment with supporting rationale
4. Potential impact on our institution (financial, operational, strategic)
5. Velocity (how quickly the risk could materialize)
6. Interconnections with other risks
7. Early warning indicators to monitor
8. Potential mitigation strategies
9. Credible sources and references

Format your response as a comprehensive risk analysis with an executive summary, detailed assessment of each emerging risk, and a conclusion with prioritized recommendations for monitoring and mitigation. Include a heat map visualization concept for risk prioritization.

IMPORTANT: Focus on factual information from credible sources. Clearly distinguish between established trends, emerging developments, and speculative predictions. Provide specific citations for key information.

5. Evaluation Criteria:

• Does the prompt clearly specify the research purpose and audience?
• Does it provide sufficient context about the institution's profile and risk exposures?
• Does it request information from diverse, credible sources across risk categories?
• Does it ask for structured analysis with actionable insights?
• Does it include guidance on distinguishing facts from speculation?

6. Practice Activity:

Create your own advanced prompt for researching domain knowledge related to:

1. Climate-related financial risks for your institution
2. Geopolitical risks affecting your supply chain or operations
3. Emerging cyber threats targeting financial institutions