In the banking industry, AI can be a key enabler and a conduit for business risks unless there is responsible AI
New technologies such as open banking and certain technology partnerships are increasing banks’ exposure to risks such as regulatory challenges, data security and financial crime.
For instance, while some countries like Australia and Singapore have implemented frameworks to support open banking, others are lagging behind or lack clear regulations. This disparity can create compliance challenges for banks as they navigate different requirements across jurisdictions.
At the same time, evolving customer needs mean that organizations must increase their operational efficiency to provide greater value for customers. Automation will be crucial for organizations to not only survive, but also thrive.
As banks leverage AI and automation, they will not enhance productivity, empowering employees to focus on more strategic work.
From reactive to proactive risk management
Banks often overlook the audit and controls function in their business transformation journeys. Amid rising regulatory scrutiny and evolving risks, this needs reviewing.
Traditionally, banks’ risk management processes hinge on deploying personnel across three traditional lines of defense:
- Protocols that ensure the accurate execution of processes
- Controls teams that test the accuracy of data and processes from the first line
- An internal audit team — the safety net — that identifies deficiencies in the first two lines.
The problem, however, is that this framework tends to be reactive, rather than proactive. Today’s complex risk environment necessitates propelling audit and controls into a future-proofed operating model that is capable of automating data gathering and preparation. This is only possible by embracing the power of AI and automation.
In this model, AI algorithms dynamically generate test cases based on changing business requirements, system updates, and emerging risks. Continuous testing, enabled by automation, allows for real-time control monitoring, facilitating immediate detection and response to failures and substantially mitigating potential risks.
