How GenAI can transform risk management and compliance
According to the Future of Professionals Report 2024 from the Thomson Reuters Institute, 89% of risk, fraud, and compliance professionals see the advantages AI provides for their departments. A large part of AI’s appeal is its ability to significantly streamline processes related to risk management and compliance. After all, these are highly dynamic and complex areas that take a lot of time, resources, and expertise to manage — including balancing risk with the needs of stakeholders or sifting through growing volumes and varieties of data sources.
So, how does AI — specifically GenAI — do this?
Advantages of GenAI
It’s widely known that industries like healthcare, education, entertainment, and marketing are adopting generative AI (GenAI). However, its value also extends to specific functions within organizations, including risk management and compliance departments. Some potential benefits include:
- Creating assets and insights. GenAI can use existing data to produce reports, assessments, summaries, and dashboards for compliance and risk. It can then use these to offer data-driven insights that inform smarter business decisions and strategies.
- Streamlining processes. Natural-language processing, computer vision, and machine learning automate and simplify data collection and analysis, saving valuable time and resources while reducing human error.
- Flagging errors. Monitoring tools identify and flag data anomalies, errors, and inconsistencies in real time, even suggesting corrective action.
- Optimizing processes. Generative AI constantly improves itself using reinforcement learning and simulation techniques. It can also strengthen organizational processes through in-depth evaluations of risk and compliance teams’ activities.
- Enabling innovation. Advanced neural networks and deep learning make GenAI a valuable tool for creating new solutions and services, assessing their feasibility, and offering iterative feedback.
Drawbacks of GenAI
It’s also widely known that generative AI is not perfect. While its ability to learn means it will constantly refine itself, there are a few limitations any risk management and compliance team must consider before adopting it. The first challenge is about data quantity and quality. GenAI requires a massive, accurate, and current data repository to provide helpful, trustworthy information.
Manually updating databases is an extremely time-consuming task for risk, fraud, and compliance teams, given that the world of legislation and cybercrime never stays still. The second challenge is all about transparency. It’s hard to know how or why GenAI creates the exact outputs it does — how does it know which information to include or exclude? Why does it prioritize one source over another? Not knowing makes it hard to guarantee its trustworthiness with absolute certainty.
The third challenge relates to explainability. GenAI is only valuable to those who can operate and interpret it. Entering poor prompts will result in a poor or easily misinterpreted output, which can do more harm than good.
In summary, before adopting GenAI, it’s critical to:
- Have a vast amount of high-quality data, as well as the means to update it automatically.
- Understand that its output may not give you the full picture, and factor this into your prompts and AI-driven work.
- Educate teams on how to effectively use GenAI to get the most value from the tool.
Is GenAI right for you?
Considered one of the most transformational factors impacting our workforces over the next five years, GenAI holds immense potential. Its data-driven automation and optimization capabilities can revolutionize risk management and compliance.
So long as users can respond to its drawbacks related to data input, transparency, and explainability, AI is a critical technology to adopt.
Still not sure if AI is right for your business? Get in touch to learn more.
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