AI can radically change risk management in everything from cybersecurity threats to contractual risks. To implement AI in risk management, your business must identify risks; find reliable data sources; develop an AI model; and monitor performance.
SwissCognitive Guest Blogger: Zachary Amos – “How to Implement AI in Risk Management”
Effective risk management within a company requires executives and employees to do whatever possible to lower the chances of risks negatively affecting the business. It’s much more than simply pointing out hazards and brainstorming how to eliminate them — some dangers will always exist. A popular trend in risk management is using new and emerging technologies, such as artificial intelligence (AI).
Learn more about AI applications in risk management and how companies can implement AI solutions to improve their risk management strategies.
The Role and Benefits of AI in Risk Management
AI is transforming virtually every industry. It’s nearly impossible for businesses to ignore the potential benefits of AI, such as improved efficiency, higher productivity and more valuable, data-driven insights. These benefits can help companies outperform their competitors and become reputable organizations in their respective industries.
PwC’s 2022 Pulse Survey surveyed 93 risk leaders from Fortune 1000 and private businesses. According to the survey results, approximately 72% of CRO and risk-management professionals say digital transformation initiatives are critical to growth in 2022.
Additionally, around 62% of respondents suggest policy shifts in technology and data lead to the most change within their organizations. The role of AI in business and the specific field of risk management will continue to grow in the coming years.
How AI Helps Mitigate Risks
Once an organization takes advantage of AI for risk management, what steps do they take to make this a reality? Unfortunately, there’s no one-size-fits-all approach to AI implementation regarding risk management.
Here are some examples of risks companies could potentially mitigate if they invested in and implemented AI:
- Cybersecurity threats like malware, phishing, insider threats and hacks
- Physical security risks, such as stolen tangible assets like facilities and equipment
- Fraud risks like identity theft, manipulation of expenses and fraudulent disbursements
- Regulatory, compliance, dispute or contractual risks
- Employee error, poor product or service quality and other reputational dangers
Other threats exist, but this provides a small glimpse into the areas of risk management AI could help improve for businesses.
How to Implement AI in Risk Management
Companies should take four steps to implement AI solutions successfully into their risk management plans. Take a deeper look at each of these steps below.
Every business is unique and operates differently. IT specialists, experts in AI and risk-management professionals must work together to identify the organization’s needs and determine which AI-powered solutions will provide the best return on investment.
Find Reliable Data Sources
After conducting a thorough risk assessment and choosing the right AI solution, the next step is finding suitable data sources. AI cannot operate effectively without reliable data. The proper information can significantly influence the quality of the results, thus positively or negatively impacting the success of a company’s risk-management efforts.
Develop an AI Model
Once an organization chooses a solution and identifies relevant, valuable data sources, it’s time to build an AI model. Some models are more complex than others. For example, one well-known telecom business used machine learning algorithms to form decision trees.
After creating the model, the company improved customer retention by 39% — a notable metric. Organizations might need to experiment or go through a process of trial and error during this stage.
The final step is evaluation. Essentially, no business can afford to implement risk-management solutions without continuously monitoring them to see if they’re effective.
Because many solutions are available, it can be challenging to determine if one is more effective than another. However, this is a critical step no company can overlook, as it will play a role in whether or not it is mitigating potential risks.
Leveraging AI in Risk Management
Modern businesses understand the importance of risk management because it ensures it functions properly. Every organization — regardless of size and industry— faces danger.
Some potential risks include cybersecurity threats, political changes, mergers and acquisitions, health crises and more. Companies should consider leveraging and implementing an innovative AI solution if they want to exercise some level of control over potential risks.
About the Author:
Zachary Amos is the Features Editor at ReHack where he writes about artificial intelligence, cybersecurity and other tech topics.