How AI’s early warning capabilities are helping banks predict market shocks

AI Reshapes Financial Risk Management with Real-Time Insights and Predictive Precision

Vikas Krishan, Chief Digital Business Officer

AI is revolutionizing risk management in financial institutions, boosting predictive accuracy to around 85% for short-term market trends (IMF, Oct 2024). It enables real-time threat detection, dynamic response to market volatility, and streamlined processes, especially in retail banking and emerging markets. However, integrating AI into legacy systems and meeting regulations like the EU AI Act remain major challenges. Reflecting on events like the 1998 LTCM crisis, the article emphasizes the need for robust oversight to avoid over-reliance on models. Scalable AI requires strong validation and governance. Institutions that balance innovation with compliance will shape a more resilient financial future.

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