Risk and AI - Stay ahead of the game
By Bernard Lam on the 26th January 2023Artificial Intelligence Banking
Banks are deploying new technology at scale. Here we explore the role of machine learning and AI in identifying and managing emerging risks.
The growing use cases of artificial intelligence (AI) in the financial sector speaks volumes of its capabilities. Businesses are constantly finding new applications for this technology to help improve efficiency and effectiveness. It's not a stretch to say that AI is here to stay.
Artificial intelligence, in general, adapts to meet users' needs by analysing usage trends from numerous data sources or broad guidelines among a sea of information. These technologies can be used for risk management to streamline existing procedures and efficiently allocate resources.
Can AI be beneficial to risk management?
We've started to see financial institutions implement AI solutions within their risk management systems. Use cases range from facilitating decision-making processes, reducing credit risks, and providing financial services tailored to their users through automation and machine learning algorithms.
Machine learning engines are capable of analysing vast volumes of data from many sources. Real-time predictive models are then created using this data, enabling security teams and risk managers to respond to any risk quickly. The models are essential for creating early warning systems that guarantee the organisation's ongoing operation and the protection of its stakeholders. Retail banks and trading floors alike are using machine learning to identify anomalies.
Banks typically need to conduct extensive analysis processes in order to detect fraud. By utilising machine learning models that concentrate on text mining, social media analysis, and database searches, AI systems can significantly reduce the workload of these procedures and lower the possibility of fraud. These are typically flagged to experienced individuals, who are able to deep dive on the information provided. This ultimately leads to better client outcomes.
AI can also assess unstructured data about potentially dangerous actions or activities in an organisation's operations. AI systems are able to recognise behavioural patterns associated with previous events and translate them into risk indicators.
We are still in the early stages of implementing and using AI for risk management and many new innovative solutions are still being developed, so it's important to stay ahead of the game.