[This article belongs to Volume - 56, Issue - 02, 2024]
Gongcheng Kexue Yu Jishu/Advanced Engineering Science
Journal ID : AES-30-11-2024-41

Title : HARNESSING AI AND ML FOR ENHANCED FINANCIAL RISK MANAGEMENT: OPPORTUNITIES AND CHALLENGES
Mahmoud Daneshmand, Piyush Ranjan, Akhil Khunger, Sumit Dhaiya

Abstract :

The revolutionary effects of AI and ML on managing financial risks are examined in this comprehensive article, with an emphasis on the potential and difficulties these technologies provide. Forecasting, investing strategies, financial services, and risk management are just a few of the crucial fields that AI and ML have transformed. As a result, forecasts are now more accurate and operations are more efficient. Better financial performance is eventually the result of financial organisations being able to make better judgements because to these improvements. Deployment of artificial intelligence and machine learning is not without major challenges, though. Many algorithms' "black box" nature makes it more difficult to explain and hold accountable models, which erodes stakeholder and regulatory trust. Financial institutions are also more susceptible to cybersecurity risks and data privacy issues as a result of their growing reliance on AI, which may jeopardise customer trust and legal compliance. Additionally crucial is the robustness of AI systems; these models need to withstand hostile attacks and unforeseen changes in the market. Furthermore, the widespread use of AI in banking may jeopardise the equilibrium of the economy overall as linked systems may transfer shocks more rapidly. This article provides a comprehensive evaluation of the current level of AI and machine learning in managing financial risk, along with significant legislative concerns to lower associated risks. Financial institutions can make the most of AI and ML to build a more secure and efficient financial system. ecosystem by tackling these issues, which will ultimately educate policymakers and practitioners about the two-pronged nature of financial innovation.