Current limitations of risk management can be addressed with artificial intelligence (AI), according to a new guide published by Ferma
While AI is still in its infancy, the technology could help risk managers overcome challenges in data, research, modelling and monitoring, the report said.
“Decisions that have previously been made mainly ‘from the gut’ or by benchmarking will become data-driven and systematic,” it said.
It added: “It will change people’s day-to-day activities, including in risk and insurance management. Insights, that now become visible only when losses occur, can in future emerge before then through learning from large volumes of historical data.”
The paper, developed with the support of experts from within and beyond the risk management community, aims to guide risk managers on how best to apply AI from a basic understanding to developing their own strategy on the implementation of the technology. It includes an action guide and a template for risk managers to develop their own AI risk management roadmap.
The report states that to perform well, AI needs data of a certain quantity and quality. The very first question to consider should concern the organisation’s strategy for managing its corporate data. As such, solving the data issue and implementing AI in business is a challenging project that impacts many corporate functions, including the risk manager.
It recommended that risk managers should consider the following:
- How can risk management frameworks integrate AI, especially as a source of new risks across the organisations?
- Can we process more data to mitigate losses?
- How can we use AI in the claims process?
- What processes will we create and what will be provided by brokers, insurers and re-insurance companies?
The Federation also published a report on GDPR and corporate governance and the roles of risk managers and internal auditors.
Developed in collaboration with the internal auditor’s organisation, ECIIA, the report focuses on the impacts of the GDPR on corporate governance practices in the year following its implementation.
Using surveys and targeted interviews, the partners gathered input from internal auditors and risk managers from various industries throughout Europe to meet the following objectives:
- Promote good governance alongside the GDPR.
- Assess the current situation and identify issues and recommendations for the GDPR.
- Collect best practices regarding good governance for GDPR implementation, including the roles of internal audit and risk management.
Both reports are available on the Ferma website www.ferma.eu