Optimizing Risk Management: The Strategic Edge of Generative AI
By: Galina Korshunova
Risk assessment is a critical pulse check on organizational health and resilience. This crucial step in the compliance process aims to preemptively uncover areas where the organization may be at risk of violating laws, regulations, or internal policies, thereby exposing itself to penalties, financial losses, or reputational damage. Yet, as the organization grows in complexity, the pulse can become fainter and trickier to discern amidst the noise of a myriad of emerging threats.
Today, there is a lot of regulatory response to technological developments, addressing cybersecurity, data privacy, eCommerce, digital assets, and now artificial intelligence (AI). As a result, the diversity and volume of risks that must be assessed grow exponentially.
Yet, despite the uptick in potential risks, compliance teams stay lean.
Optimizing resources is critical. In fact, about 87% of compliance departments say they are currently evaluating the use of new technology within their compliance department.
Generative AI has made a big splash in the tech world in 2023, and it has found its place as an auxiliary tool in regulatory compliance as well. Below, we discuss—and give specific examples of— how Generative AI can help the compliance function boost risk management.
What is Generative AI and How Does It Serve Compliance?
Generative AI (also known as a large language model) refers to the latest advancement in artificial intelligence systems that are capable of producing detailed, relevant, and context-aware responses—fast. It can generate those responses by analyzing vast amounts of data on any given subject—including laws and regulations. As such, it is a viable solution to tackling the volume and the speed of regulatory developments, given that the solution provider trains AI on the latest legal information.
Now, instead of spending hours cross-referencing regulatory documents or continuously seeking expert opinions, a Generative AI solution can help understand, analyze, and generate content based on vast and complex data sets.
When used as a compliance tool, Generative AI can deliver quick analysis, interpret, and even predict the regulatory needs of an organization.
It is as good as the data it’s trained on, so if it leverages real-time regulatory updates from agencies across the globe, it can draft policies and controls based on the company's specific industry and region along with identifying relevant requirements.
Boosting Risk Mitigation Strategies with Generative AI
While the basic steps of the risk assessment process remain consistent—identifying assets, mapping regulations, evaluating risks, formulating mitigation strategies, etc.—the specifics, depth, and focus areas need adjustment based on the unique regulatory and operational challenges of each industry.
Generative AI, with its adaptability, can be fine-tuned to serve the specific needs of each sector, ensuring that risk assessments are both comprehensive and industry-relevant.
Here's a breakdown of how it can assist.
Identification of Assets and Processes
AI's Role: AI can scan internal databases, documents, and systems to automatically identify and catalog assets and processes. Machine learning algorithms can be trained to recognize and categorize these elements, ensuring no component is overlooked.
Regulatory Mapping
AI's Role: Generative AI can parse through vast amounts of regulatory documents swiftly, extracting relevant clauses and mapping them to the organization's specific assets and processes. The AI can also flag any changes or updates in these regulations as soon as they are made public.
Risk Identification
AI's Role: By analyzing historical data and incorporating insights from the specific function and related functions, AI can predict potential risk areas or flag anomalies that might indicate a compliance concern.
Risk Evaluation
AI's Role: AI can prioritize risks, considering factors like historical data, industry trends, and predictive analytics to score and rank risks based on severity and likelihood.
Mitigation Strategy Formulation
AI's Role: Generative AI can suggest mitigation strategies based on historical successes, current best practices, and predictive modeling, ensuring that the proposed strategies are also forward-looking.
Periodic Review and Update
AI's Role: With continuous monitoring capabilities, AI can automate the review process, constantly checking for regulatory changes or shifts in the business environment and updating the risk assessment accordingly.
Documentation
AI's Role: Generative AI can automate the documentation process, generating detailed, structured reports that capture every aspect of the risk assessment process, from identification to mitigation strategies. These reports can be tailored to different audiences, from internal stakeholders to external auditors.
Training and Communication
AI's Role: AI can generate training modules based on the risk assessment findings, ensuring that they are tailored to specific roles or departments. Additionally, AI-driven communication tools can ensure real-time dissemination of critical updates or changes in the risk landscape.
In essence, Generative AI doesn't just streamline the traditional steps; it amplifies their effectiveness, ensuring that risk assessment is comprehensive, up-to-date, and aligned with the dynamic nature of the modern regulatory environment.
Implementing Generative AI into Your Compliance
The potential value of Generative AI in risk management is unequivocal; it is the amplifying force that compliance teams need to stay ahead. From analyzing bulky legislative content to helping draft effective controls, AI is redefining the frontiers of regulatory compliance.
As organizations harness Generative AI to enrich their risk assessment protocols, they will find themselves not only well-equipped to deal with present challenges but also prepared to anticipate and counteract future vulnerabilities. This new tool can help ensure that risk management is not a static checklist but a living, breathing strategy that evolves with every new piece of data, every shift in the regulatory tide.
There are Generative AI solutions like Reggi that your compliance team can try today for free. And if you would like to learn more comprehensively about Generative AI for regulatory compliance—including its current limitations—download our free eBook here.
