Calibrate and validate credit risk models

Trigger: A scheduled review cycle, a regulatory mandate, or a significant shift in macroeconomic conditions initiates the reassessment of an active credit risk model.

1. Extract and normalize historical default, recovery, and macroeconomic data
2. Run statistical backtesting to compare past model predictions against actual outcomes
3. Calibrate model parameters to reflect recent portfolio behavior and risk profiles
4. Execute sensitivity analysis and scenario stress tests on the recalibrated model
5. Perform independent validation of the model's conceptual soundness and mathematics
6. Draft the formal model validation report and detail any required remediation plans
7. Obtain internal governance and regulatory approval for model deployment

Outcome: The credit risk model is statistically tuned, independently validated, fully documented, and approved for production use in capital allocation and underwriting.