A model risk management framework establishes policies, processes, and controls to manage risks from quantitative models used in business decisions, regulatory compliance, and financial reporting. Key components include model inventory, development standards, independent validation, performance monitoring, and change management protocols. Regulatory guidance such as SR 11-7 from the Federal Reserve mandates robust frameworks for banking institutions. For example, a bank using credit scoring models must maintain comprehensive documentation, perform regular back-testing, validate assumptions, and establish clear accountability for model ownership and oversight.