AI in Risk Management: An Overview of Applications in Firm Management, Financial Markets, and Risk

When managing and minimizing the risks in some domains, like for instance finance and firm management, artificial intelligence (AI) is necessary. In the current world of AI, risk measuring and analyzing are being provided by tools. Utilization of AI in risk management in terms of firm management, financial market, and risk forecast are reviewed in the paper. Ability to apply AI based decision making in evaluating operational risks, strategic planning in the firms provides a better opportunity. In finance, AI aids at prediction and investments in high frequency trading (HFT) and portfolios. Like any other application, machine learning also proves convenient when it's used to assess credit, market and liquidity risks for AI. This paper also describes future assessments based on risk analysis, predictive analytics and stress testing that is based on AI. Disadvantage of using AI in risk management is related to data quality defects, algorithmic errors, ethical issues. We conclude AI is a good tool for the development of finance, but on the other hand, changing the risk management strategy.