From Oversight to Foresight with AI-Powered Risk and Compliance
Many risk management and compliance (R&C) functions are costly, labor-intensive programs that struggle to keep pace with the speed of business and technology. Often reliant on capabilities designed for specific purposes rather than evolving risks, and on siloed tools developed in a bygone era, these teams find it increasingly challenging to generate value and maintain relevance.
Yet, these teams possess significant, untapped potential that has largely eluded digital reengineering efforts—unlike the front office. Until recently, business leaders either didn’t recognize the potential ROI or feared unintended consequences of disrupting R&C functions. However, this perspective is shifting as emerging use cases for transforming these processes reveal substantial opportunities for savings and growth hiding in plain sight. A growing openness among regulators toward the responsible use of AI is fueling this shift.
As confidence grows and regulatory expectations evolve, senior executives now perceive a window to modernize responsibly—using AI not just to spur efficiency but to drive speed, capacity, and growth. The need for speed and smart risk-taking is more pressing than ever as companies navigate the uncertainty of geopolitical shifts, regulatory change, and the latest advances in technology.
The Strategic Future of R&C Teams
R&C teams that seize this moment will position themselves for a vastly different future. By scaling their capabilities with automation, risk-signal monitoring, agentic solutions, and real-time insights, these teams can make smarter decisions faster while reducing operational expenses. This evolution allows them to transform into highly strategic advisors to the business.
Innovative Applications of AI in R&C
The impossible is now possible. AI is unlocking entirely new ways of managing risk and compliance that, until recently, weren’t feasible. Consider several high-impact examples:
- Implement Risk-Horizon Scanning
With access to vast external data sources and indicators of risk, R&C teams can continuously scan for risk signals and highlight those that require further review and potential action. By supplementing these data sets with internal indicators, outdated static interview-only risk assessments will become relics of the past. AI can identify which clients, suppliers, functions, locations, products, or transactions may pose higher risks, acting as a flashlight to uncover potential problems.
- Manage Regulatory Change in Real-Time
Regulatory change management has historically been cumbersome, spread across various groups, and few organizations excel at it. With AI-enabled technology, companies can monitor different regulatory bodies and promptly update internal policies, procedures, and controls to reflect new requirements.
- Simulate Data for Scenario Planning
Traditional scenario planning often falters due to insufficient data to replicate real-world situations. AI can generate synthetic data to mimic and test hypothetical scenarios, enabling faster and more confident strategic decision-making.
- Build a Virtual Regulator
In addressing novel compliance questions, businesses have historically analyzed applicable rules and guidance to predict acceptable courses of action. AI can streamline this process by creating virtual regulators—personas informed by the relevant agency’s regulations—to pressure-test your organization’s plans and mitigate unnecessary sunk costs. Similar approaches can lead to the development of virtual auditors, further reducing compliance costs and auditor fees.
- Validate Models with Risk Analytics
AI is transforming how institutions test, document, and monitor models, which is increasingly under regulatory scrutiny. These tools can automatically generate documentation, compare outputs under different conditions, and flag anomalies for review. They can also create synthetic data sets to stress-test model performance in varied scenarios without exposing sensitive information. While human review is necessary for defensible decision-making, AI outputs can provide teams with a crucial head start, uncovering issues and patterns that may remain hidden without AI assistance.
In conclusion, the integration of AI into risk and compliance functions represents a significant evolution in how organizations manage these critical areas. By embracing these technologies, R&C teams can not only enhance efficiency but also drive strategic growth and adaptability in an ever-changing business landscape.
