How might the rise of robots affect financial risk?
Artificial intelligence (AI) has been poised to take the world of technology by storm for some time now, and it seems that its impact on the financial advice market could be imminent.
But how would this affect the financial industry’s risk profile? And what would the effect of robots be on recruitment?
Robots on the rise
A recent survey from Deloitte led to the discovery that robots could be providing financial advice to one million people in the UK over the next few years, completely transforming the face of the financial services market.
By using the latest AI to provide people with monetary advice, banks and other financial authorities could dramatically improve some aspects of their customer service, with Deloitte even predicting that robot-handled transactions could save consumers as much as £100 each time.
Figures show that robot advisers currently handle under £1 billion of financial assets in the UK, but over in the US, the robo-advisory market dealt with some $19 billion (£13 billion) worth of assets under management in 2014, indicating the potential scope of the sector to grow in the coming months and years.
The rise of AI in the finance industry appears to largely come hand-in-hand with the expansion of online money management – an area that has grown rapidly in recent years.
Andrew Power, investment manager partner at Deloitte, commented: “The UK is well-placed to use robo-advisers, given the high take-up of other online services. For example, in general insurance, nearly three-fifths of people use price comparison websites to research and buy their insurance policies. This is only going to increase – as technology develops, people become more comfortable using it and more companies turn to digital platforms.
“For wealth managers, robo-advice technology could mean people have access to a broader range of advice that is personalised and at a lower cost.”
The impact on financial risk
While there are clear benefits to embracing AI in the financial industry, such as efficiency improvements and bankers getting the opportunity to show that they’re at the forefront of the latest developments in the digital age, relying on robots to make important financial decisions can present additional risk to a business.
There will always be questions surrounding whether or not robots are able to make the best judgement in a complex situation, meaning organisations that introduce AI to act as financial advisors should ensure they step up their risk management procedures at the same time.
Essentially, there are two sides to the coin when it comes to robots and their impact on financial risk. On the one hand, the use of AI can help to lower the industry’s risk level by completing tasks to a pre-programmed standard, but on the other, it can increase the sector’s risk profile.
Putting the responsibility of important financial decisions that could affect the entire country’s economic situation can have huge risks, while the upkeep of machines can prevent workers from focusing on financial tasks and instead having to spend time on mechanics.
What’s more, if there’s a fault with the robot, the wrong decision could be made, with potentially disastrous consequences.
Robots and recruitment
However, it could also be argued that unless companies are taking advantage of the highest levels of expertise when recruiting for finance positions, they could be placing themselves at the same level of risk that comes with using robots.
Therefore, firms that aren’t quite ready to make the move to AI should ensure they are investing in hiring the best quality candidates possible.
Although robots would naturally take some people’s jobs due to their ability to perform multiple tasks in a quicker and more efficient manner, the extra risks that using AI brings means that human expertise will still be needed to keep an eye on financial risk.
In light of this, financial compliance and risk management specialists could see an increase in demand for their services as the rise of robots takes hold throughout the UK’s finance sector.
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