Why 45% of financial firms are turning to GenAI for risk management

By Gloria Methri

The financial sector is embracing artificial intelligence (AI) with a surge in the use of GenAI and Large Language Models (LLMs) to transform operational and non-financial risk (ONFR) management. According to ORX’s latest report, ‘The Drive Towards Digital ONFR Management’, 45% of financial firms are already leveraging generative AI assistants to enhance risk strategies, and an equal percentage plan to implement LLM-powered solutions within the next 18 months.

This shift underscores the industry’s growing recognition of AI’s potential to improve efficiency, data centralisation, and decision-making processes.

A key takeaway from the report is the productivity boost provided by GenAI tools. Helen L’Abbate, Deputy Director – Research and Information at ORX, emphasised that GenAI is reshaping human decision-making by facilitating knowledge discovery and automating complex processes.

“We are seeing firms use it to support knowledge discovery, drafting code and documents, and significantly enhance decision-making in areas like risk frameworks and taxonomies,” L’Abbate stated.

From drafting documents and summarising data to automating workflows, these tools are revolutionising everyday operations in ONFR functions. Popular tools include OpenAI’s ChatGPT, Microsoft Copilot, Amazon Q, and Google Gemini. ChatGPT leads adoption at 35%, followed by Copilot at 22%.

Centralised Data: The Backbone of Risk Management

The report also highlights the critical trend of centralising ONFR-related data pipelines. An overwhelming 95% of firms have already centralised, or are actively working towards centralising, their operational data to streamline risk management strategies.

This data-first approach enables firms to create unified risk frameworks, enhancing their ability to respond swiftly to policy inquiries and improving decision-making processes across various functions.

LLMs: Small-Scale Adoption with Big Ambitions

While LLMs are gaining traction, their use remains on a smaller scale compared to GenAI assistants. Currently, 14% of firms employ LLMs in production applications, and 45% use them for application development. Encouragingly, 77% of firms have long-term plans to integrate LLMs into their risk management frameworks.

LLMs are being leveraged for stakeholder collaboration and machine learning initiatives, with firms gradually building, training, and deploying their AI-powered applications.

The report underscores the financial sector’s commitment to harnessing AI’s potential to manage risks more effectively. By integrating tools like GenAI and LLMs, firms are not only improving efficiency but also fostering innovation in risk management.

As adoption accelerates, the industry is poised for a paradigm shift where AI becomes a cornerstone of smarter, data-driven decision-making. With 64% of firms planning GenAI tool rollouts in the next 12-18 months, the transformation is only just beginning.