Finding the Balance for AI and Human Risk Management

Technology’s forever invading reach knows no limits. In the domain of risk management, automation is not only employed for mundane tasks, but also for the reporting of narratives and expanding data conditions.

A logical analysis of data forms a unified and dominant ‘Center of truth’ unlike hundreds of contradicting perspectives. In addition to predicting risk, it also gives versatile applications all over an organization. Artificial intelligence appears all ready to modify corporate accounting. By 2025, AI could report for 30% of audits.

Advisory and Accounting firm Richey May said that by that time, a section of the international medium and large businesses will rely on a crisis management approach to collect digital risks in their business environment by 10% more than in 2018.

Automated or semi-automated risk?
Automation invalidates less efficient, slower, and high-cost manual processes. It decreases the staff training price and provides the staff with some free time to learn more value-added and creative tasks. KPMG said that automated processes reduce the cost by up to 75% for financial services companies.

According to Oracle, the nature of unanticipated risk has increased the chances for improving risk management. Given the business’ international nature, investors are increasing focus on transparency and the COVID 19 pandemic.

The year 2020 witnessed digital technology rising up as people start working from home. That said, the risks increased as well. It was found out in a recent Deloitte poll that in the next six months, respondents expect their company’s top managements challenges to include the virtual work environment and staff changes (26.9%), as well as third-party risks (22.2%).

The same poll, studying the traditional risk, reported that 5.8% of the pollee thinks that during the past year, there was a reduction in the frequency and size of the risk that their company’s internal control programs faced. Around 22.1% of people believe that their organizations used advanced technologies to their maximum advantage.

At-office or remote, organizations rely heavily on their people to develop cooperation, flare-up innovation, drive better practices, and keep an eye on the optimization level. Almost a year passed since we have been informed of the appropriate power of technology. Although, it does not come without hardships, as the troubles over cybersecurity demonstrate.

Finding a balance
According to Deloitte in their report, ‘The Future of Risk in Financial Services’, the world currently has reached a crossroads. Financial institutions need to decide if they will continue with business as usual or instead fundamentally rethink their approach to risk management, it states.

In a paper entitled ‘The Future of Bank Risk Management’, McKinsey identified six patterns transforming the risk mechanism, two of which centered on interactions between humans and machines. They emphasize on talent pool refreshment, stating that data scientists with specialized mathematical and statistical skills are expected to work together across the bank to turn data findings into business behavior. The report also suggests developing a strong culture of risk management where risk identification, evaluation and mitigation must be part of the everyday work of all bank employees and not just those in risk positions.

On the other hand, PwC highlights five main ways in which companies adopt automation and among them is ‘risk and compliance analytics.’ It believes that to find the right combination of applications and automation that fits their needs, companies need to analyze their situation and available automation capabilities.

Thanks to improved AI, cognitive automation and better-designed ‘bots, KPMG suspects we might have reached a tipping point. Employee payrolls can be expensive, but the amounts of redesigning entire organizational processes will be even more expensive.

For some time to come, it appears, businesses will need to strike a balance between automation and human relations.