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How AI And Machine Learning Help in Comprehensive IRM (Integrated Risk Management)?

Have you ever given a thought about the technologies that surfaced on the digital spectrum in the last few years?

Starting with automation laden AI and ML to the connectivity drawing IoT, the life simplifying on-demand apps and the speed fueling 5G, everything seems to bring out the best. From the top firms to the smallest business ventures, everyone across the globe is inching towards the adoption and integration of such technologies.


But are you sure that none of these would be detrimental? Do all come with benefits and only benefits? Let us narrow down our research to the top two in the spectrum, AI and ML.

As far as researches go, the two have been imposing huge success on industries worldwide. Apart from the fact that 37% of the organizations have already implemented the duo, it is anticipated that by 2021, nearly 80% of technologies would have AI/ML in some form or the other.

Fascinating, right? Let’s hear this.

According to a report published by Swiss Think Tank, it is predicted that 75M jobs would be replaced by machines. One industry to be a direct victim of the above is the insurance sector. In an interview with Warren Buffett, the leaders believed that as the world migrates to the culture of autonomous driving, the auto insurance sector would face a serious disruption with the business shrinking by 60% in the upcoming times (25 years on an average).

Now, accepting that the auto industry conjures 40% of the entire insurance sector, such a decline is likely to affect the economy and the operations of the same. It’s high time that the chief leaders spent some time restructuring their business strategy and take measures to deal with the situation.

On the other hand, a major question that arises is how would these technologies impact or affect the risk managers, or put simply, how AI and ML drive IRM?


AI and ML in Integrated Risk Management


Even though AI seems to have a diverse impact on the workers, it also embodies a series of benefits. With technology, comes smarter tools and solutions that help risk managers better assess the infrastructure to detect potential risks. Both, the AI and ML have proven to be the table turner. The finance sector has always been under the benefit of the doubt but not today.

Both the credit unions and banks now have access to modern software solutions that are efficient in identifying fraud long before if inflicts the system.

Earlier the bankers and the financial risk managers had to do things manually. The customer crediting system relied on simple heuristics which weren’t reliable. Survey groups and other forms of customer interaction, part of assessment failed to map the ideal reality. Everything done was based on assumptions with little or no consensus.

The entire infrastructure was outdated and siloed. Today, as more and more technologies evolve, the industry and nearly every corporate business enterprise have a better way to detect, manage and monitor risks. With smarter digital tools, the risk managers and the operational officers have access to actual customer information in real-time which can be used to make decisions and drive significant operations.

AI emerges to be the catalyst triggering operations and business activities to be conducted at a faster pace and with better efficiency. For organizations that have been looking to work on credits, the risk assessment tools powered by AI and ML seem to be beneficial. Algorithm-based software is now put to use as these can effectively assess the consumer profile and render insights on their credit score. Cognitive technologies such as these not only increase the speed at which work is done but at the same time, improves the quality.

Risk managers can now have better hold over the user’s profiles and enter into information-based decision making for better results.

Another advantage of the technology in risk management has been the structuring of uncluttered data. Organizations, irrespective of the domain, have a pool of raw data nowadays. When left untouched, they are of no use. However, with the onset of AI and ML tools, these data can be effectively processed, structured and analyzed to come up with insights. This real-time information is used by chief risk officers to make better and smarter decisions.

It is proven that AI and ML help organizations to detect and prevent risk, rather than spending time battling with identifying and curbing the loss. This implies that enterprises today are well prepared to fight with risks long before the fatalities hit the system.


Application of Al & ML – Different Ways the Technology Help Risk Management

Application on Credit Risk

With time, the complexities associated with the calculations of credit risk have risen beyond boundaries. It is evident that the traditional method of risk assessment is no longer effective rather futile. Adhering to the above, the managers and organizational leaders have now taken up ML models to detect risk and make better lending decisions. Till date, ML models have proven to outsmart the existing tools with accurate results and 25% cost reduction.

Application on Market Risk

Trading and investment is something that every organization does and aims to incentivize. However, to unleash the true value, it is important that risks are managed and monitored efficiently. Trading involves predictions and when done manually, they are prone to be inefficient. Organizations and financial experts are now advancing towards the adoption of ML and AI models, designed to smartly assess market conditions and come up with insights predicting the most favorable outcomes.

Application on Operational Risk

Industries are always at the risk of losing assets or facing financial loss emanating from a breakdown. Risk managers have the duty to continuously monitor the enterprise operations to prevent the onset of such a situation. With an increase in the system, operations, and variety, managers have been grappling to meet the requirements and this is where AI and ML pop in. AI tools have been successful in assisting managers at various levels of management. Starting with the identification of risk, to the extent of exposure, migration, and mitigation, AI tools aid all.

As seen, AI embeds automation which can reduce human error, study data samples, and outline thefts beforehand. They help identify fraud and further embed measures to mitigate its impact.


The Final Word


Summarizing, the onset of artificial intelligence and machine learning has been a game-changer. Not just for the financial institutions or the credit unions, but organizations worldwide are putting the technology to use. In case, you have been on the lookout of such a solution but failed to find one, reach out to Claptek.

We are a team of skilled professionals and dedicated enthusiasts working tirelessly to help organizations make the most out of their arrangements while minimizing exposure to risk. Our team is a reliable solution partner and offers integrated management solutions to organizations across the globe.

Having years of experience, Claptek has served multiple clients and are proud of our IRM offerings. Our name resonates with the quality of work rendered and the appreciation received in return. We don’t expect you to believe without giving it a try. Let’s connect and collaborate before you set any opinion for us.

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