How generative AI can help banks manage risk and compliance?

  • Generative AI will revolutionise bank risk management. It automates tasks, improves efficiency, and allows risk professionals to focus on strategic areas.
  • Generative AI transforms bank risk management by shifting to strategic prevention, creating AI-powered risk centers, and enhancing efficiency and decision-making.
  • Gen AI aids banks in risk and compliance through regulatory compliance, financial crime detection, credit risk analysis, data analytics, and cyber risk management.

Generative AI enhances risk management and compliance in banks by automating tasks, improving decision-making, and increasing efficiency and transparency.

–Alaiya Ding, BTW reporter

Generative AI transforms bank risk management by shifting from task-oriented activities to strategic risk prevention, enhancing efficiency, creating AI-powered risk intelligence centers, and improving decision-making and risk transparency.

Revolutionising risk management with generative AI

Generative AI (gen AI) is set to transform how banks manage risks over the next three to five years. This technology allows financial institutions to shift from task-oriented activities to strategic risk prevention, significantly enhancing efficiency and effectiveness. For example, gen AI can enable the creation of AI-powered risk intelligence centers that provide automated reporting, improve risk transparency, and support decision-making. These centers can serve all lines of defense, from business operations to compliance and risk functions, offering a reliable source of information for swift and accurate decision-making.

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Emerging applications in risk and compliance

Financial institutions are exploring multiple applications of gen AI in risk and compliance, including regulatory compliance, financial crime, credit risk, modeling, data analytics, cyber risk, and climate risk. Gen AI can act as a virtual expert, summarising information from long-form documents and unstructured data to provide tailored answers. It can automate manual processes, such as generating suspicious-activity reports and updating customer risk ratings. In the realm of credit risk, gen AI can accelerate the credit process by summarising customer information and generating credit memos.

Enhancing cybersecurity and managing climate risk

Gen AI also plays a crucial role in enhancing cybersecurity by identifying vulnerabilities, generating detection rules, and accelerating secure code development. It can simulate adversarial strategies through “red teaming” and aggregate security insights to detect risks more efficiently. In managing climate risk, gen AI can suggest code snippets, facilitate unit testing, and automate data collection for counterparty transition risk assessments. Additionally, it can generate early-warning signals and ESG reports, helping financial institutions address environmental, social, and governance challenges. By integrating gen AI into these functions, banks can strengthen their risk management frameworks and improve overall resilience.

Operational risk and capital adequacy

Banks can leverage gen AI to streamline operational risk management through automation of controls, monitoring, and incident detection. Gen AI can automatically draft and evaluate risk and control self-assessments, ensuring high-quality evaluations. In terms of capital adequacy, gen AI can accelerate the internal capital adequacy assessment process by sourcing relevant data and synthesising risk positions. This enables banks to model capital adequacy more effectively and draft comprehensive risk reports for senior management.


Alaiya Ding

Alaiya Ding is an intern news reporter at Blue Tech Wave specialising in Fintech and Blockchain. She graduated from China Jiliang University College of Modern Science and Technology. Send tips to

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