How Cognitive Computing Can Impact Risk Management
When cognitive computing is applied against massive data sets, this ends up helping organizations process the information in a quicker manner and make better business decisions. Cognitive computing is often used when it comes to the domain of risk management, meaning taking out uncertain and ambiguous data in order to identify the indicators or both known and unknown risks.
Make Business Decisions That Are Boosted and Empowered
In order to take a preventative risk stance, the public sector organizations and other companies are more often using large amounts of internal and external data. However, due to the increase in data volume, traditional analysis’s effectiveness seems to be diminishing. Different cognitive capabilities, like natural language processing, machine learning, and other cognitive technology offer an alternate option to the standard analytics. Plus, they are being applied to large data sets in order to discover indicators of both known and unknown risks.
So, why is cognitive computing getting popular?
When it comes to performing mechanical calculations, computers have always been faster as compared to humans. However, what makes cognitive computing different is its ability to learn. Computers weren’t always good at what humans called the gray areas of reasoning and thought; however, this is quickly changing in the cognitive era.
Moreover, cognitive computing works great when taking care or unstructured data, which consists of information that does not neatly fit within structured rows and columns. Semantic computing and handwriting, natural language processing, and image recognition are cognitive technologies that utilize advanced algorithms in order to study unstructured data so that it can obtain insights and sentiment. In 2015, an International Data Group study concluded that around 90% of data that was being generated is unstructured; hence, using cognitive computing can be quite beneficial for a business.
Here is where risk management and cognitive computing can come together. With cognitive computing, companies can easily identify and calculate incoming threats and strategic risks that can endanger everything the executives care about way before those risks can cause any damage leading to more costs. Moreover, with cognitive computing, companies can identify different emerging trends, recognize the reward/risk tradeoff that is inherent in value creation, and develop funding decisions plus resource allocation. Plus, leaders who control cognitive capabilities can obtain competitive advantage and use it to give power to their organizations’ performance.
Using Cognitive Computing With the Risk Domain
Here, fraud detection can be used as an example. Previously, a method of identifying fraud consisted of using computers to analyze the structured data of an organization against rule sets. Fraud specialists, for instance, will create a limit of USD$10,000 when it comes to wire transfers. Hence, any transaction that is more than that will be flagged by the computer for further investigation. A drawback of this type of structured-data analysis is that it creates a lot of false positives; hence, requiring long hours of close scrutiny.
However, now with cognitive computing, detecting fraud will become a lot more accurate and robust. For instance, a cognitive system may detect a transaction as potential fraud, but if the human recognizes this fraud to be false due to whatever reason, then the computer will learn from those human insights. Hence, it will not flag a similar transaction the next time. With every interaction, the computer gets smarter, which makes this a massive game changer.
Additionally, the more the cognitive fraud detection systems learn, the better they will be able to identify more complex fraud. This is a major advantage for risk management. Cognitive technologies discover new patterns to watch out for as they help reveal emerging patterns that humans were unable to detect. This is a continuous cycle that will not end, which makes it a great advantage against fraudsters who are always evolving their vicious schemes.