Organisations are increasingly turning to artificial Intelligence (AI) and advanced technologies to transform risk management strategies amid a rapidly evolving risk landscape, according to a new report by KPMG. The consulting firm’s “Future of Risk” report, a global survey conducted in early 2024, found that AI and generative AI are the most popular technologies being adopted to manage additional risk responsibilities. As the risk environment becomes more complex, AI is seen as a critical tool for enhancing the ability to filter through data, identify trends, and suggest actionable solutions.
Risk management professionals indicate that leveraging AI and advanced analytics is a top priority for the next one to three years. Around 90% of respondents recognise that the pace of risk management transformation has accelerated, with change being driven by technological disruptors. Because of this, integrating AI is deemed an essential prerequisite to staying ahead of emerging risks.
AI to play outsized role in risk management
According to KPMG’s survey, executives are planning significant investments in technology. About 41% of respondents said that they expected to spend more than half of their risk management budget on technology in the next 12 months, an increase from 28% in the previous year. This trend shows a shift towards AI-driven risk management solutions. These solutions are expected to increase efficiency, reduce costs, and provide more precise risk assessments.
A significant number of executives surveyed (98%) also believed digital acceleration has improved their approach to risk management, particularly in the areas of risk identification, monitoring, and mitigation.
Moreover, the use of AI and generative AI is not just limited to identifying and quantifying risks. It also plays a crucial role in automating routine processes and enabling faster, more accurate responses to emerging risks. However, the effective use of these technologies requires robust data governance and a unified data architecture to avoid data fragmentation and ensure comprehensive risk insights.
“This report makes clear the need for organisations to fundamentally alter their approach to risk by embracing risk as an enabler and an asset that drives stakeholder value,” said KPMG International global risk leader Nancy Chase. “As our survey shows, executives are already aware of the scale of transformation required and are taking steps to address this.”
Training needed to increase familiarity with AI in sector
The KPMG report emphasises the need for organisations to develop a workforce equipped to handle the evolving risk landscape, particularly in relation to technology-driven changes. As organisations embrace AI and other digital tools, the report argues for firms to build a “risk-centric” workforce that can leverage AI platforms effectively.
Over the next three to five years, risk management teams are expected to be supplemented with skills in IT risk, predictive modelling, and cybersecurity. The focus is on creating new roles, upskilling workers, and aligning workforce capabilities with AI and analytics-driven risk strategies, says the report.
The survey results also reveal the importance of collaboration and integration in effective risk management. A majority of respondents (68%) believe that the integration of risk management systems, domains, and processes significantly enhances decision-making effectiveness. However, the current level of collaboration between risk domains is considered inadequate by 46% of respondents, indicating a need for more cohesive cross-functional task forces and communication strategies to better manage risks.
AI adoption is viewed as a catalyst for this integration, helping to break down silos and provide a comprehensive view of risks across the organisation. By uniting various functions under a shared risk framework, companies can ensure that AI and other advanced technologies are utilised to their full potential, supporting both risk mitigation and value creation.
Written by Swagath Bandhakavi
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