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From Black Swans to Brighter Futures: FIs Ride with Data/AI & Cloud to take control of Risks &am

Black Swan events happen rarely, BUT it gives a tremendous opportunity to reinvent to create brighter futures – only if the business is proactive to handle.

 One way FIs can prepare is by digitaltransformation leveraging AI, Machine Learning, and Cloud to mitigate risk and address regulatory requirements while enhancing decision-making capabilities.

 The wind is strong, which might cause the Black Swan moment…

As you can see, a myriad of forces prompting to act upon.

To ride the wind…

FIs should be able to quickly assess risks since the risks are more or less not changing – where AI can lead the way to address the lurkers in the shadowy corners of cyberspace to mitigate the FI's risks by using historical data to predict future risks. FIs and regulatory authorities enforce enhanced protective measures with innovative technology to combat, like adopting risk-reducing strategies like automation controls and real-time responses is the most important innovation. Gaining a greater understanding of risks is armoring FIS with accurate risk assessments and implementing predictive modeling to create trust with customers and reduce business disruptions. AI positively impacts the balance sheet by minimizing the risks by automating security systems for threat detection, capturing the data and mining, and using NLP systems to understand trends and be proactive.

AI and Cyber Risk Management: By leveraging AI and machine learning technologies, FIs can better manage risk by analyzing vast amounts of data in real time. Use AI to detect anomalies and predict potential threats before they occur to measure and mitigate risk proactively. For example, AI-powered fraud detection systems can analyze transaction data and identify suspicious patterns that may indicate fraudulent activity to alert you in Real-time to act immediately.

Regulatory Compliance:

Constantly "Listening" to fine-tune to adhere to regulatory compliance is a massive benefit for the FIs to stay ahead in the competition. "The U.S. RegTech market was valued at USD 2.55 billion in 2022 and is expected to reach USD 8.21 billion by 2028, growing at a CAGR of 21.54% during the forecast period. RegTech uses modern technologies such as big data and artificial intelligence to overcome regulatory challenges, mainly in financial services". (See the full article). A fleet of Fintechs invests in financial crime, governance risk and compliance, regulatory reporting, regulatory risk calculations, and assessing the risks to refactor. While RegTech is trying to understand the regulatory risks, there is an emerging technology to supervise the situation – SupTech to improve efficiency through digitization and automation. Both RegTech & SupTech rely on Data Management – mine the big data with advanced analytics, which includes predictive modeling using data science and visualizing the data to act.

AI and Decision-Making:

Enhance decision-making capabilities by mining complex data sets to identify patterns and trends with AI-powered analytics tools to give a human to make informed decisions with ethics. Also, utilizing Natural Language Processing (NLP) powered tools to analyze unstructured data, such as news articles and social media posts, to identify potential risks. NLP can help FIs stay on top of emerging risks and take proactive measures and decisions to mitigate them.

As agile as possible in preparation for the unforeseen Operational Risk Management:

The need for digital transformation increased exponentially, triggering a mass shift of cloud migration that resulted in more Regulatory scrutiny. In a way, it has enhanced the agility yet disrupted the fintech space. A whitepaper by PwC found that applying cloud strategies in risk management has benefited FIs due to the replacement of legacy infrastructure. With cloud services, FIs can create risk assessments with enhanced accuracy to build a roadmap for future solutions. Cloud strategy certainly streamlined risk management due to the capability of responding to threats in real time while building preventive methods. However, it also opened up the vulnerability of emerging risks, for example, threats due to using 3rd and 4th party applications as part of core banking. Though some exposure is built due to the cloud, the most critical fact for the business is to bounce back with agility - resiliency. FIs can use historical data on operational incidents, such as system failures or security breaches, to identify potential operational risks. These models can then inform risk management strategies and improve operational resilience.

In conclusion….

The next Black Swan event is unpredictable. However, financial institutions can prepare by leveraging AI, machine learning, and Cloud technologies to mitigate risk, enhance decision-making capabilities, create resiliency, and address regulatory requirements. By harnessing the power of emerging technology to innovate, FIs can improve their ability to navigate uncertain times and emerge from the next Black Swan event without a scratch while riding the wave to grow exponentially. The key is to embrace innovative technology and integrate it into every aspect of the organization's operations, from risk management to customer service.

With Data/AI & Cloud as a strategic allies, FIs can stay ahead of the curve and thrive to see a bright future.


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