From Findings to Actions: Phrase Bank for Management Actions in Validation Reports

Purpose and Regulatory Expectations for Management Actions

Validation reports do more than list weaknesses; they convert technical findings into commitments that management can deliver and regulators can audit. In mature model risk management (MRM) frameworks, the management action section is the bridge between evidence and execution. It answers the questions: What exactly is wrong? Why does it matter? What will be done, by whom, by when, and how will success be judged? When written well, actions are not wish lists—they are contract-like commitments that are clear, traceable, proportionate to risk, and aligned with policy.

Regulators expect a specific tone and structure. Under SR 11-7 and PRA SS1/23, actions should be evidence-based (grounded in documented findings and tests), risk-based (prioritized by materiality and model risk impact), time-bound (committed to realistic but firm timelines), accountable (assigned to named owners and governing bodies), and proportionate (calibrated to the severity and use of the model). These expectations are not stylistic preferences; they are compliance signals. An action that reads as vague or open-ended risks supervisory challenge. Conversely, a well-structured action signals effective governance: the bank understands the issue, has sized the risk, and will fix it credibly.

Clarity also matters for senior audiences. Executive Committees and Board-level Risk Committees do not want technical depth inside the action text itself. They want crisp statements that make the risk and the remedy legible at a glance. The detail—technical diagnostics, test scripts, thresholds—belongs in the finding evidence and appendices. The action body should reference that evidence without duplicating it. This discipline delivers two benefits: it keeps actions readable for executives, and it preserves an audit trail that supervisors can test.

Finally, management actions must sit coherently within the wider MRM lifecycle. They should reference model tiering and use-cases, link to model risk appetite, and align with governance processes (e.g., validation cycles, periodic performance monitoring, model change management). Regulators look for this integrated view: the action is not an isolated fix but part of how the organization manages model risk end-to-end.

The Action Statement Structure

A strong action statement follows a consistent structure. Think of it as a compact chain that ties evidence to accountability:

• Condition (finding)
• Consequence (risk/impact)
• Commitment (what will be done)
• Control/Owner (who is responsible and who oversees)
• Timetable (when milestones and due dates occur)
• Metric/Acceptance criteria (how completion and effectiveness are measured)

Each link has a distinct purpose:

• Condition: Summarize the validated deficiency, referencing the evidence location (e.g., section, test number, threshold). Keep it factual and reference-based.
• Consequence: State the model risk or business impact in plain terms (e.g., bias, instability, misuse, control failure), calibrated by materiality and model tiering.
• Commitment: Describe the action as an observable change: remediate, redesign, implement, enhance, retire, monitor, or govern. Avoid verbs that sound aspirational without operational meaning (e.g., “consider,” “explore”).
• Control/Owner: Assign a named function or role as primary owner, and name the oversight body (e.g., Model Risk Committee). This signals accountability and governance.
• Timetable: Provide clear dates and interim checkpoints, aligned to the model lifecycle. If a dependency exists (e.g., data availability, system releases), state it and still commit to milestones.
• Metric/Acceptance criteria: Define what “done” looks like and how effectiveness will be validated. This can include quantitative thresholds, documentation standards, or evidence of governance sign-off.

When this structure is used consistently, actions become scannable documents. Readers can quickly locate the risk, the fix, the person accountable, the deadline, and the success test. Auditors and supervisors can trace from the finding to the action to the evidence.

Phrase Bank by Action Type: Templates and Variations

The following phrase bank provides reusable language aligned to common action categories. Each template is written in the regulatory tone described above and can be adapted with specific evidence references, risk statements, owners, and dates.

1) Remediation (Fixing a defect)

• “To address the validated deficiency in [component/process] evidenced in [Report §/Test ID], the [Team/Owner] will remediate [specific defect] by implementing [specific fix], with completion by [date], subject to oversight by [governance body]. Effectiveness will be evidenced by [metric/threshold] observed over [period] and validated by [independent function].”
• “The model will be corrected to remove [identified error/bias] documented in [evidence], with code changes deployed to production by [date]. Success is defined as [test-name] meeting [threshold] across [data segments], confirmed through out-of-sample validation and sign-off by [committee].”
• “We will eliminate [control gap] by introducing [control/process], ensuring [frequency/coverage]. Completion requires [artifact] and a repeat of [validation test] demonstrating [target].”

Regulatory tone signals: decisive verb (address/correct/eliminate), evidence reference, measurable end-state, oversight and independence.

2) Mitigation/Compensating Controls (Reducing risk while remediation is pending)

• “Pending full remediation, we will implement compensating controls to mitigate [risk] by [control action], effective [start date], reviewed [frequency] by [owner], and reported to [governance]. Controls will remain in place until [remediation milestone] is met, evidenced by [metric].”
• “To reduce exposure from [issue], the business will apply [limits/overrides/checks] with thresholds of [value], with breaches escalated within [timeframe] per [policy].”
• “A temporary usage restriction will be applied to [model/use-case] limiting [decisions/portfolio segments] until [acceptance criteria] are achieved.”

Regulatory tone signals: time-bound temporary control, clear trigger to remove control, escalation path.

3) Monitoring (Tracking performance and risk indicators)

• “We will establish enhanced monitoring for [metric(s)] to detect [drift/bias/instability], commencing [date], with monthly reporting to [committee]. The monitoring pack will include [KPIs/KRIs], thresholds of [values], and predefined actions on breach.”
• “Model performance dashboards will be extended to cover [segment] and [period], with [statistical test] applied consistently and documented in [location].”
• “Monitoring design and results will be independently reviewed by [function] each [frequency], with exceptions logged and tracked to closure.”

Regulatory tone signals: specificity of metrics, thresholds, and governance cadence.

4) Governance/Escalation (Strengthening decision rights and oversight)

• “We will formalize decision rights for [model/change/use] by updating [policy/standard] and embedding an approval checkpoint at [stage], effective [date], overseen by [committee]. Evidence of adherence will be captured in [system] and sampled each [frequency].”
• “A mandatory escalation protocol will be introduced for [breach/exception], requiring notification to [roles] within [timeframe] and documented rationale for any temporary overrides.”
• “The Model Risk Committee will receive a quarterly attestation on [scope], including open actions status, overdue items, and risk acceptance decisions with documented justification.”

Regulatory tone signals: policy linkage, explicit oversight, audit trail.

5) Model Redevelopment/Retirement (Strategic change to the model)

• “Given the material limitations evidenced in [sections], we will initiate model redevelopment for [use-case], with design finalized by [date], development completed by [date], and independent validation by [date]. Production cutover will occur by [date], with retirement of the legacy model by [date]. Success criteria include [performance thresholds] and [stability checks].”
• “If redevelopment fails to meet [criteria] by [date], we will transition to retirement of [model] for [use-case] and adopt [alternative approach], subject to governance approval and usage restrictions during transition.”
• “A structured model change submission will document methodology changes, data lineage, feature governance, and benchmark comparisons, aligned with policy [ref].”

Regulatory tone signals: staged plan, go/no-go criteria, fallback path, and independence.

6) Data/Process Enhancement (Improving inputs and operations)

• “To address data quality issues identified in [tests], we will implement [data controls/profiling/validation rules] at [ingestion/transformation] with thresholds of [values], monitored [frequency], and exceptions resolved within [SLA].”
• “We will establish end-to-end data lineage for [critical fields], with stewardship assigned to [roles], and documentation stored in [system], reviewed quarterly.”
• “The model production process will be standardized with [runbook/checklists/segregation of duties], with periodic control testing by [independent function].”

Regulatory tone signals: control clarity, ownership, and measurable SLAs.

7) Documentation Upgrades (Making the model evidence legible)

• “We will update the model documentation to meet policy [ref], covering methodology rationale, assumptions, limitations, and validation evidence, with completion by [date] and independent review by [function].”
• “All monitoring reports will include traceable test definitions, data sources, and threshold rationales, stored in [repository] with version control.”
• “We will create a model user guide that specifies approved use-cases, prohibited uses, controls, and escalation routes, with acknowledgment required from [user groups].”

Regulatory tone signals: policy alignment, completeness, versioning, and independent review.

Tying Actions to Materiality, Model Risk, and Evidence While Staying Readable

Actions should always be proportional to the risk and legible to executives. Achieve this by calibrating three elements: evidence references, materiality statements, and readability discipline.

• Evidence references: Point to the exact place where the issue is proven (e.g., “see §3.2, Test T-07, breach of [threshold] across [segments]”). Do not restate the analysis inside the action. This keeps the action concise and auditable.
• Materiality and model risk impact: Signal importance succinctly: “This affects Tier 1 models used for capital allocation,” or “Exposure limited to [business line] with low aggregate impact.” Align with the bank’s model risk taxonomy (e.g., misuse risk, performance risk, change risk). This demonstrates risk-based prioritization.
• Readability for ExCo: Use concise sentences, avoid jargon, and choose verbs that describe observable actions. Place long technical details in appendices. Ensure each action fits on a short paragraph with bullets for timelines and metrics if needed.

A practical rule is to limit each action to one core commitment per paragraph, with optional bullet sub-points for milestones or acceptance criteria. This format makes actions consistent across the report, enabling senior readers to scan quickly while preserving auditability for regulators.

Apply the Structure: From Raw Findings to Regulator-Ready Actions with a Checklist

To reliably transform findings into actions that satisfy SR 11-7 and PRA SS1/23, follow a disciplined workflow supported by an evaluation checklist.

Workflow:

• Extract the verified finding: Confirm the diagnostic, scope, and evidence location. Identify affected use-cases and model tiering.
• Define the consequence: Translate the deficiency into risk language consistent with model risk appetite and policy (e.g., potential for biased decisions, unstable outcomes under stress, governance non-compliance).
• Choose the action type: Map the remedy to one of the seven categories: remediation, mitigation, monitoring, governance, redevelopment/retirement, data/process enhancement, or documentation upgrade. Multiple actions may be needed for complex findings.
• Set ownership and oversight: Assign the accountable owner (role/team) and the governance body that will receive updates and approve closure.
• Commit to timelines: Define realistic but firm dates and interim checkpoints. If dependencies exist, state them along with interim risk controls.
• Define acceptance criteria: State the metric(s), threshold(s), and independent validation or sign-off requirements that will confirm the action is effective, not just complete.

Evaluation checklist for each action:

• Evidence-based: Does the action reference specific findings/tests/thresholds? Is the link auditable?
• Risk-based and proportionate: Does the action reflect model tiering, materiality, and use-case impact? Are controls calibrated to the risk?
• Time-bound: Are there clear dates and milestones? Are dependencies disclosed with interim mitigations?
• Accountable: Is a named owner and oversight body assigned? Are reporting and escalation channels defined?
• Measurable outcomes: Are acceptance criteria explicit, quantitative where possible, and independently verifiable?
• Policy-aligned: Does the action align with SR 11-7 and PRA SS1/23 principles and internal MRM policy?
• Readable: Is the action concise, free of jargon, and suitable for ExCo review?

Applying this checklist across all actions creates consistency and credibility. It also accelerates closure because owners know exactly what evidence will be required for sign-off, reducing rework and supervisory questions.

Bringing It Together

The management action section is the operational heart of a validation report. It translates analytical findings into a plan of record that withstands regulatory scrutiny and drives real change. By using the structure—condition, consequence, commitment, control/owner, timetable, and metric—you embed the compliance signals regulators seek: evidence-based, risk-based, time-bound, accountable, and proportionate actions. By drawing from a modular phrase bank organized by action type, you maintain consistency and speed while tailoring to each model’s risk profile and lifecycle. And by anchoring every action to clear acceptance criteria and independent sign-off, you move beyond promises to verifiable outcomes.

The result is language that is both executive-friendly and regulator-ready: concise yet complete, technical yet readable, standardized yet adaptable. With disciplined use, these practices will make your validation reports stronger, your remediation more effective, and your engagements with oversight bodies more efficient and constructive.