The risks of artificial intelligence used for decision making in financial services

Udo Milkau ()
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Udo Milkau: EACB, Postal: Tiroler Straße 28i, D-60596 Frankfurt, Germany

Journal of Financial Transformation, 2021, vol. 52, 128-141

Abstract: The risks associated with the use of artificial intelligence (AI) have captured the attention of research, regulation, and industry practitioners in recent years. Given that this is a vast topic in its own right, we are using the experiences of the financial services industry, in specific credit scoring, as a proxy for some of the salient features of AI from a sociotechnical perspective. Although it shares some of the operational risk challenges associated with other technologies, a model for decision making reveals how the interfaces with the social context create two new types of risk: naiveté in the use of data for training AI as a statistical classifier and perceptions of the stakeholders regarding its societal implications. While the first can – and has – to be mitigated by increased literacy within an active internal risk management, the latter requires building trust.

Keywords: Artificial Intelligence; Decision-making; Operational Risk; Social Context; Perceived Risks (search for similar items in EconPapers)
JEL-codes: D81 G32 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1654

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