Artificial Intelligence is Transforming Asset Managers’ Risk Management Models, Clearwater Analytics Research Reveals

Artificial Intelligence is Transforming Asset Managers’ Risk Management Models, Clearwater Analytics Research Reveals

BOISE, Idaho, NEW YORK, CHICAGO, LONDON and HONG KONG, Aug 26: Artificial intelligence (AI) is transforming key components of asset managers’ operational processes, and nowhere is that more evident than in their risk management practices, new research from Clearwater Analytics shows.  For an industry where speed and precision of risk identification often determines whether exposure is managed or missed, the shift AI is driving matters well beyond efficiency.

Almost all fund managers (95%) surveyed across a broad spectrum of fund managers including insurance asset managers, hedge funds, private markets specialists, and general asset managers, have seen improvements in the level of real-time insights being generated since adopting AI into their risk management systems, while 17% said those changes had been dramatic.

Managers using AI in risk management in this function want to develop a more proactive model, one built to predict and prevent risk in real time. Almost a third (32%) said their process had become much more proactive, while a further 60% said they had seen a slight increase in proactivity. Only 8% had seen no change from using AI.

Predictive analytics is where the shift becomes most concrete. AI offers the ability for managers to develop their risk management systems to deliver greater predictive analytics. Supported by machine-learning models that can analyze vast data sets to identify patterns and predict future trends with greater accuracy than traditional methods, this will be highly beneficial for forecasting risk

Since they began to use AI, the vast majority of fund managers (87%) said their ability to use predictive analytics as part of their risk management had improved, with a fifth (20%) claiming the improvement was dramatic. Some (12%) had seen no change, and only 1% said it had worsened.

The gains extend into reporting as well. In addition to offering better predictions, 88% of managers said the ability to process vast amounts of data had increased the turnaround of regulatory and accounting reports. Almost half (42%) said they had increased the speed of report production by between 10% and 24%, while a further 30% said it had increased between 25% and 49%. Almost a tenth (9%) had seen the speed they could generate reports increase by between 50% and 74%.

Manual reconciliation tells a similar story.   More than half of managers (55%) have seen a reduction in the need for manual reconciliations. A fifth (20%) have seen these reduce by up to10%, 19% have seen them reduce between 10% and 24%, and 15% have been rewarded with reductions of between 25% and 49%.

Only 2% of managers said they had not yet used AI within this function. Almost a quarter (24%) said using AI had actually slowed their process down, a reminder that these gains depend on how well the technology is implemented, not simply on whether it’s adopted.