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11 April 2025

Quantification of model risks (Glossary)

Artificial intelligence Automation Big data and smart data Crowdfunding and finance Digital transformation AI Glossary

The quantification of modelling risks is a term that is primarily used in the fields of artificial intelligence, big data and smart data as well as crowdfunding and finance. It describes the measurement and evaluation of uncertainties that arise when companies use computer or calculation models to make important decisions. Model risks arise because models can never represent reality in its entirety - incorrect assumptions, poor data quality or unexpected events can lead to incorrect results.

One example: In a bank, software is used to decide whether someone gets a loan. If the model makes mistakes, it can happen that solvent customers are rejected or risky loans are granted. By quantifying model risks, the bank can assess how great this uncertainty is and how strongly it affects the business. Accordingly, it can take measures to reduce the risk.

Quantifying model risks therefore helps companies to better assess the reliability of their digital models. This enables them to make decisions more responsibly and avoid unwanted surprises.

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Sanjay Sauldie

Sanjay Sauldie is a digital strategist, speaker and developer of the transruption toolkit, which companies can use to make their digital transformation measurable, human and sustainable. With kiROI - the AI-based approach to value creation in the digital age - he helps self-employed people and companies to integrate artificial intelligence into their processes in a practical way. With his outstanding marketing strategy iROI, he has already led countless companies to greater visibility and thus more profits. He combines digital innovation with disruptive thinking models for a sustainable business strategy. He studied mathematics and computer science at the University of Cologne, completed a Master of Science in Digital Disruption at the University of Salford (UK) and a Design Thinking programme at MIT/EMERITUS Singapore. As a multiple award-winning expert - including the Golden Web Award and the Innovation Award of the Initiative Mittelstand - he advises SMEs and corporations. His motto: "Digitalisation is not an end in itself - it must serve people."

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