A FRM's Guide to Digital Risk Management

Automated credit scoring technology can be beneficial for financial institutions engaged in credit provision. The technology can optimize FRM's commercial success with applications such as credit card issuance, personal loans, microloans, and buy-now-pay-later.

Fremont, CA: Financial risk professionals continue to be challenged by rapid technological advances. Any Financial Risk Manager (FRM) can benefit from artificial intelligence, machine learning, and natural language processing. A number of FRMs are using tools built with one or more of these technologies, including fraud detection, anti-money laundering, credit underwriting, and expected credit loss modeling.

To reduce financial risk exposure, FRMs can use a variety of technologies. Risk management can be supported by five key areas of technology.

ENTERPRISE RISK MANAGEMENT (ERM) SOFTWARE

The enterprise risk management (ERM) process is one of the most widely used methods for identifying, assessing, and mitigating the risks faced by financial services firms. In addition to providing financial risk managers with the ability to identify and analyze multiple types of financial risks, ERM platforms are also known as risk management information systems. ERM systems provide FRMs with visibility into areas where undesirable risks may arise, both from traditional and unconventional sources, so they can take appropriate measures to prevent them.

GOVERNANCE, RISK, AND COMPLIANCE (GRC)

Governing, managing risk, and adhering to laws and regulations are all part of GRC. Because GRC is complex, many solutions must be combined into one umbrella system with specialized software. Risk departments can use natural language processing software to overcome common communication problems such as ambiguity, complexity, and unclear communication. Various applications, such as fraud prevention and insider trading detection, benefit from this.

AUTOMATED CREDIT SCORING TECHNOLOGY

Automated credit scoring technology can be beneficial for financial institutions engaged in credit provision. The technology can optimize FRM's commercial success with applications such as credit card issuance, personal loans, microloans, and buy-now-pay-later.

CYBERSECURITY

The knowledge of cybersecurity tools and practices is essential for FRMs if they are going to manage technology risk effectively.

With the evolution of market developments and demands, as well as the transition to digitalization, organizations have created many opportunities. Hackers and fraudsters are constantly inventing new and sophisticated ways to conduct data breaches, commit financial fraud, and damage enterprises with cyber-attacks, which have generated a whole new profile of risk.

CLOUD COMPUTING

Increasingly, companies are using AI algorithms to identify patterns in their data and analyze it for ongoing strategic value extraction. Corporate concerns about security threats and data breaches are being addressed by cloud providers to a great extent. Increasingly, FRMs realize that continuing with on-premise infrastructure may increase their risk, including security update oversights, data breaches, and technical issues such as system failures. In contrast, cloud providers provide ongoing security updates and maintenance and their services typically grow as an organization's needs change.