Black Friday Sale! 50% Off All Access

The Rising Need For Financial Risk Management AI plays a big role in financial risk management because of its ability to deal with lots of data with supreme accuracy

By Sanchita Dash

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock

Advancement in fintech with the foray into the payments sector has seen the most of India opting for online transactions and transfers. The only time banks saw queues were during demonetisation and with the boom of start-ups, who decided to do away with cash, banks are again seeing a lull period.

But with the rise of fintech as well as the dependency on it, it's important to keep in mind the security aspect. Here comes the importance of risk management start-ups.

Risk-management refers to the analysis, prediction and even combating of financial risks that minimize dangers a financial institution is exposed to.

Need For Risk Management

Vikrant Varshney, a risk evangelist who is the Chief of Board of Advisors of Risk Resources — A Risk Boutique Firm— realized the growing need as well as the huge gap that currently exists while conducting sessions on risk management for start-ups recently.

"With emerging technology and payment gateways, there is an emerging risk as well. From cyber security risk, payment gateway risks to frauds, companies still do not comprehend the real need for risk management. With higher exposure to customers, there's also a huge vulnerability to the system," he said.

"Holistically, there's much more that can be done in the sector. Any company that also has a payment gateway faces the risk of fraud internally, from the customer's side or from a third party that is in no way related to the supply chain. They can completely disrupt the system. Now, bigger start-ups are finally hiring roles under risk management," Varshney, who has also been the Chief Security and Fraud Risk Officer at HSBC, added.

The accelerated growth of the digitalization and technology also poses a significant challenge to many companies' business models as well the inherent risks involved. Risk management is an imperative for an organization because without it, a firm cannot possibly define its objectives for the future.

With start-ups continuously on an innovation mode in technology and constantly evolving business operations, companies are facing a new scourge viz. "technology-based frauds' as systems, platforms and operations don't stabilize and aren't time-tested, before they are rolled out.

A Huge Market

Keeping in mind the increasing use of technology, the market of risk management is also higher in India right now.

"The need for risk management start-ups is greater in our country than in many others. It's a great test bench to find, validate, and test unique solutions. Many businesses still run in the old way despite being propelled and exposed to various technologies. There is great scope for risk management products in our country as we get a variety of use cases to test our solution. In cyber-security, there exist many unique use cases and these create the need and opportunity to build unique solutions for these problems. We at AuthBase use deep learning to mitigate these cyber attacks," said Umesh Thota, Founder of Authbase, a cyber security platform.

Role of AI

Artificial intelligence plays a huge role in financial risk management. From preventing money laundering to verifying credibility of a consumer, AI comes into the picture because of its ability to deal with lots of data with supreme accuracy.

"With the onset of technology, today there are millions of data points that are available to everyone online; but the trick lies in extracting the right information from the right source. AI can help in the profiling of a person when they apply for a loan. Earlier, the verification used to be done based on a few parameters and that too with the available information. Now, there are over 300-400 parameters for one person alone that can be accomplished through AI. It also plays a role in signature matching in cheques," said Sainath Gupta, Founder of Anything.AI. He also added that AI can be used in identifying right investments. "When properly trained, AI can give proper decision which is fast and cheap compared to human counter parts.

Sanchita Dash

Entrepreneur Staff

Former Senior Correspondent, Entrepreneur India

In the business of news for 5 years now. Making my way across India thanks to my career. A media graduate from Symbiosis, Pune, I have earlier worked with Deccan Chronicle (South India's leading English daily), T-Hub (India's largest incubator) and Anthill Ventures (a speed-scaling platform). 

Stories, movies and PJs are my thing. 

If you hear 'The Office' opening score randomly, don't worry it's just my phone ringing. 

 

Business News

'Father Time Always Wins': Warren Buffett, 94, Just Announced Major Changes to His Plan to Give Away His Money

Warren Buffett continued his Thanksgiving tradition with a $1.1 billion donation of Berkshire Hathaway stock to four of his family's foundations.

Business News

This Is What Black Friday and Holiday Shoppers Are Really Looking for This Season, According to New Research

Shopify's annual holiday survey revealed some surprising news about retail spending this holiday season.

Science & Technology

5 Ways AI Can Accelerate Your Entrepreneurial Journey

AI empowers entrepreneurs to optimize IP management by accelerating patent searches, monitoring for infringement and simplifying drafting, helping them secure and monetize their innovations faster.

Side Hustle

How Side Hustles Are Redefining Careers and Shaping the Future of Work

Here's how more than 4 million Americans have transformed side hustles into independent careers, earning over $100,000.

Growing a Business

They Went From Selling Hangers as Kids to Starting a Retail Brand Worth $100 Million – Here's What the Property Brothers Learned About Entrepreneurship

The kings of HGTV, Property Brothers Drew and Jonathan Scott, share their insights as lifelong entrepreneurs.

Money & Finance

Become Your Own Bank and Control Your Financial Future With These 5 Steps

The key to becoming your own bank lies in developing a self-reliant approach to money management.