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Recursive Governance: A Graph-Theoretic Framework for Risk Propagation and Drift Detection in Agentic AI Systems

Jul 2026 · arXiv.org · Vol abs/2607.23916 · 0 citations · 14 references
Computer Science Mathematics

TL;DR

A dynamic Inventory-as-Code (IaC) governance loop is proposed that treats the model inventory as a living architectural component rather than a periodic documentation artifact and introduces a calibrated Degree of Autonomy (DoA) materiality score with an explicit, taxonomized tool-complexity weighting scheme that addresses the dominance problem of naive additive risk formulations.

Abstract

As financial institutions transition from traditional predictive models to autonomous agentic systems, the static model inventory requirements of traditional model risk management (MRM) face structural obsolescence. This paper proposes a dynamic Inventory-as-Code (IaC) governance loop that treats the model inventory as a living architectural component rather than a periodic documentation artifact. We make four principal contributions. First, we introduce a calibrated Degree of Autonomy (DoA) materiality score with an explicit, taxonomized tool-complexity weighting scheme that addresses the dominance problem of naive additive risk formulations. Second, we construct the agent inventory as a Directed Acyclic Graph (DAG) and define a formal Composite Risk Propagation algorithm under which upstream validation failures induce risk penalties on all reachable descendants. Third, we develop a Trajectory Monitoring protocol based on distributional cosine drift across ensembled Chain-of-Thought (CoT) embeddings, with an explicit procedure for constructing and certifying the Golden Path baseline, a matched-bootstrap calibration that we show is necessary to avoid a severe false-positive artifact in the naive alternative, and a two-stage response that separates legitimate reasoning variation from detrimental drift without demanding that a single exceedance event trigger an irreversible action. Fourth, we address practical complications largely absent from the prior literature: LLM base-model version changes, latent feedback loops in nominally acyclic agent graphs, and a two-pass execution structure that stages validation ahead of risk propagation.

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