What happens when the models running our financial system fail? And how do we govern AI systems we don’t fully understand?
Ahead of the FINOS (Fintech Open Source Foundation) conference in New York on 21st-22nd October, JUXT CTO Henry Garner speaks with David Kelly, Chief Scientific Officer at MKM Labs, model risk governance expert and recipient of the FINOS “Best Newcomer” award.
David is the author of several books, including Handbook of Model Risk Management for Vendors. Models are a foundational part of our society, underpinning the entire financial system and, through the ever-increasing prevalence of AI, shaping the rest of our lives as well.
Beginning with an explanation of what models are and why model risk deserves serious attention, the conversation explores where model risk originates: from environmental factors like unexpected inflation, and from internal issues such as models being used in ways they weren’t intended. The discussion moves through the evolving risk landscape from geopolitical and climate risks to the challenges posed by emerging AI tooling. To address these challenges, David shares practical strategies for managing model risk, covering vendor trust, scenario testing, and the importance of mature customer engagement. He reveals a counterintuitive insight: being upfront about your model’s limitations and communicating proactively when issues arise actually strengthens, rather than undermines, client relationships.
The conversation also tackles organisational challenges for technical leaders such as managing handovers between specialists, balancing innovation against reliability, avoiding the trap of “shoehorning” tools into inappropriate use cases, and understanding why accelerating individual performance with AI doesn’t automatically translate to improved team outcomes. Of particular interest to risk managers, and anyone building or deploying AI/ML systems, especially in regulated industries.
Henry will be presenting “Accelerating FINOS AI Governance Framework Adoption in Financial Services” at the upcoming FINOS conference. Please come and say hello to continue the conversation.
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