Interview with Andrew Hrdlicka, Assistant Vice President, Modeling and Analytics Officer at BOK Financial

1. Model Risk Management in U.S. Regional Banks
Interview with Andrew Hrdlicka, Assistant Vice President, Modeling and Analytics Officer at BOK
Financial
Errors in financial models that banks use on a daily basis could lead to tremendous financial and
non-financial losses. It is crucial for banks to understand how they could minimize and manage
model risk effectively. In addition, the OCC and the Federal Reserve have recently released new
guidelines on model risk management, which will significantly modify their existing model risk
management practices.
Andrew Hrdlicka answered a series of questions written by GFMI before the Model Risk Conference,
December 3-5, 2012 in New York, NY. Andrew shares his thoughts on how risk management is
different for regional banks.
What key changes have you already made because of the new guidelines on model
risk?
Andrew Hrdlicka: As described by the Federal Reserve and the OCC in SR Letter 11-7,
“Rigorous model validation plays a critical role in model risk management; however, sound
development, implementation, and use of models are also vital elements. Furthermore,
model risk management encompasses governance and control mechanisms such as board
and senior management oversight, policies and procedures, controls and compliance, and
an appropriate incentive and organizational structure.”
At BOK Financial the Model Review Group is a committee of senior managers responsible for
ensuring that the bank’s model risk management structure adheres to the guidance provided by
regulators. The Model Review Group acts a governance and control mechanism, maintains model
policies and procedure, and supervises the approval and validation of models.
The Model Review Group was in place before the new supervisory guidelines were released. MRG
has since ensured that existing model risk management structures were consistent with the new

2. guidance. MRG has also incorporated relevant sections of the guidelines into BOK Financial’s model
policy, particularly guidance related to model validation. MRG also expanded the role of the
Subgroup on Technical Analytics and Research (STAR). STAR’s original purpose was to provide
quantitative support to the Model Review Group as they assess whether models brought before the
MRG have been thoroughly vetted. STAR’s role was expanded to act as a consultant to the
business lines during model development to ensure models are developed to the high standards
required by supervisory guidance, as well as to perform validations of models that would otherwise
not come before the MRG.
What challenges do regional banks face in comparison with other banks when model
risk management is concerned?
AH: Regional banks generally deal with small modelling groups and limited data sets. The biggest
challenge for regional banks is to develop a model risk management structure that utilizes limited
modelling resources efficiently in both the development and validation of models while ensuring
strong controls and procedures are in place.
What are the key methods for quantifying model risk at BOK Financial?
AH: Model risk can be difficult to quantify. The Model Review Group is responsible for maintaining a
current list of all models used throughout BOKF for significant business decisions. These models
must be reviewed and validated regularly, and any models that are not reviewed in a timely manner
are escalated to the Risk Oversight and Audit Committee.
How do you validate vendor models in-house?
AH: Validation of both internal and vendor models is supervised by the Model Review Group. This
group is a subgroup of the Risk Management Committee which is used proactively to assess
whether proposed models and changes to models have been thoroughly evaluated by the
sponsoring departments.

3. The Model Review Group ensures that all models have been independently reviewed, thoroughly
documented, and that procedures have been created to ensure ongoing validation of each model.
Independent review of models is often conducted by the Subgroup on Technical Analytics and
Research (STAR). The purpose of STAR is to provide quantitative support to the Model Review
Group as they assess whether models brought before the MRG have been thoroughly vetted. If
available, STAR conducts a thorough review of the model’s code and calculations. If source code is
not available, STAR’s review focuses on ensuring the assumptions, theory, procedure, and output of
the model are reasonable.
How do you think attendees would benefit by attending this conference?
AH: As mentioned above, model risk can be very tough to quantify and address. This conference
will provide an opportunity to learn from fellow professionals how model risk is both measured and
mitigated at other financial institutions.
Andrew Hrdlicka is Assistant Vice President, Modeling & Analytics Officer at BOK Financial. Andrew
began his career with BOK Financial as an IT intern in 2007, but moved to Risk Management when
he began his Master of Science in Finance at the University of Tulsa in the fall of 2008. Andrew
holds a bachelors’ degree in Computer Science from the University of Tulsa, and completed his
masters’ degree from the University of Tulsa in May 2010.
For more information please contact Michele Westergaard, Senior Marketing Manager, Media & PR,
marcus evans at 312-540-3000 ext. 6625 or michele@global-fmi.com
About the Model Risk Conference 2013
This unique event will take place in New York, NY from December 3-5, 2012. Industry leaders
attending this event will benefit from a dynamic presentation format consisting of workshops, panel
discussions and case studies. Attendees will experience highly interactive conference sessions, 10-
15 minutes of Q&A time after each presentation, 4+ hours of networking and exclusive online access
to materials post-event.

4. About Global Financial Markets Intelligence
GFMI is a specialized provider of content led conferences for the financial markets. Carefully
researched with leading financial market experts, our focused quality events deliver key bottom line
value through targeted presentations, interactive discussions and high level networking opportunities