Undoubtedly, Artificial Intelligence (AI) has been the buzzword in 2023, and rightly so. From being the subject of Sci-Fi movies a few years ago we are beginning to unlock the true potential it holds. AI in Risk Management is now a reality. Data is the foundation of Rubix’s Credit and Supplier Risk Assessment platforms and solutions. We are seeing first-hand how AI tools are leveraging data to proactively manage risk and facilitate decision-making.
AI offers an edge over traditional methods because it can quickly and accurately identify patterns in data, find anomalies, and evaluate potential risks before they materialise in today’s VUCA world.
This means, AI can fortify fraud detection capabilities, both in terms of timeliness and reducing human effort and error. We are most excited about AI’s ability to analyse vast amounts of unstructured data as it will improve the fraud detection and risk assessment capabilities of our platforms and solutions, which will help companies build robust supply chains and take prudent risks.
The other significant trend we have seen this year is the spotlight on Environmental, Social, and Governance or ESG. Companies are realising that ESG compliance is not just important from a regulatory perspective but also from the standpoint of business.
ESG considerations have become important for investors and for customers too, because everyone (including employees) wants to work with businesses that are doing the right thing for the environment and society. We expect ESG Ratings to become more prominent in Risk Assessment in the year ahead.
While these two have been exciting developments, the heightened geopolitical risk in 2023 has been concerning. Even as there is no end in sight to the Russia-Ukraine conflict, the Israel-Hamas war seems to be spiralling out of control, with ripples being felt in the Red Sea shipping route and parts of the Middle East.
Combining this with the ongoing US-China trade war and the Russia-NATO conflict, geopolitics will continue to cause volatility in 2024 as well. This will continue to stress supply chains, making global trade all the more uncertain.
The other big concern in credit risk management is the rise in identity fraud. Though AI’s capabilities are evolving for the greater good, they are also being misused to perpetrate fraud through synthetic identities and deepfakes. This means businesses will have to adopt robust identity verification protocols and solutions to stay one step ahead of fraudsters.
Success stories from 2023: This year, Rubix Data Sciences also received an accolade for our project, ‘SME Income Range Estimation and Financial Ratio Benchmarking.’ This initiative is designed to address the longstanding challenges associated with providing financial insights about small and medium enterprises (SMEs), particularly those without accessible financial statements.
Rubix has developed proprietary algorithms powered by extensive data sources, domain expertise, and advanced analytical modelling to estimate income and other financial metrics for SMEs.
This initiative by Rubix significantly enhances the ability to assess SME creditworthiness and provide risk scores to SMEs when traditional financial statements are not available. This, in turn, facilitates the flow of trade credit and finance to deserving SMEs.
Learnings and realizations from 2023: Risk Management is a dynamic, ever-changing domain. As I mentioned in one of my earlier responses, AI in Risk Management is now a reality. I realized that my knowledge of the topic was superficial at best, and I needed to understand AI better.
As I result, I enrolled in a course that not only provided an understanding of AI large language models (LLM) like ChatGPT but also provided me with hands-on experience in deploying these models in our business. I have concluded that AI is an essential tool for business (and life).
Entrepreneurs and professionals at all levels need to equip themselves with the skills that are required to understand and deploy AI in business. Companies that don’t participate in the AI revolution will become obsolete. I also think it is imperative for educational institutions to integrate AI into their curriculum so that their students are not left behind.