Artificial Intelligence (AI) is becoming a focal point of interest across industries, but it has the potential to be particularly transformative in areas such as governance, risk management, and compliance (GRC). These software platforms, essential but costly tools for risk and compliance departments, are being enhanced by AI to better enable them to:
By incorporating AI into their GRC platforms, firms may extract greater value from past investments, allowing them to leverage large, complex data sets to better detect and understand risk, supplementing or replacing historical models based on standard statistical analysis.
Potential GRC use cases for AI extend to horizon scanning, where it can evaluate legislation, enforcement actions, and public comments from regulatory agencies to identify future risks. Critically, AI may also allow firms to analyze where internal controls have failed in the past and to identify where they are likely to fail in the near term. This positions firms to mitigate such risks proactively.
After the failures of Credit Suisse and Silicon Valley Bank this past spring, bank regulators are looking to broaden capital cushions as a means of creating systemic safeguards to offset operational risks. Further extending the already numerous benefits promised by AI, by demonstrating an ability to harness AI in order to address operational risks before harm is suffered, firms may be better placed to argue for capital relief.
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