How Can Financial Institutions Prepare for AI Risks?
Artificial intelligence (AI) technologies hold big promise for the financial services industry, but they also bring risks that must be addressed with the right governance approaches, according to a white paper by a group of academics and executives from the financial services and technology industries, published by Wharton AI for Business.
Wharton is the academic partner of the group, which calls itself Artificial Intelligence/Machine Learning Risk & Security, or AIRS. Based in New York City, the AIRS working group was formed in 2019, and includes about 40 academics and industry practitioners.
The white paper details the opportunities and challenges of implementing AI strategies by financial firms and how they could identify, categorize, and mitigate potential risks by designing appropriate governance frameworks. However, AIRS stopped short of making specific recommendations and said that its paper is meant for discussion purposes. “It is critical that each institution assess its own AI uses, risk profile and risk tolerance, and design governance frameworks that fit their unique circumstances,” the authors write.
“Professionals from across the industry and academia are bullish on the potential benefits of AI when its governance and risks are managed responsibly,” said Yogesh Mudgal, AIRS founder and lead author of the white paper. The standardization of AI risk categories proposed in the paper and an AI governance framework “would go a long way to enable responsible adoption of AI in the industry,” he added.