From Trump and Brexit to BLM and COVID-19, we are living times of uncertainty. The readiness of Artificial Intelligence (AI) and disruptive technologies, bring a new dimension to Enterprise Risk Management (ERM). Together, they deliver AI based Risk Management and becomes a value-adding component of Strategic Management. AI based Risk Management is the Future or ERM.
This blog and our books promote the use of artificial intelligence in both ISO 31000 and COSO ERM frameworks. We aim to create a comprehensive GRC framework. by utilising AI and the range of other disruptive technologies available today.
AI based Risk Management
Although referring to AI based Risk Management, more accurately it utilises a wide raft of disruptive technologies. This is the general term that covers a swath of new technologies that are changing the face of the world, as we know it. As an example:
- Probabilistic Modelling – to mirror real-world uncertainty and aggregate the effects of risk on strategic objectives;
- Big Data – to build risk collateral and identify trends and evolving risk;
- Neural Networking – to classify risk, identify and map real world interrelationships;
- Predictive Analytics – to set up threat management & preventive action programs;
- IoT – Intelligent Things – to monitor changes in environmental factors in real-time;
- Virtual & Augmented Reality – to gain a quantum leap in staff training and awareness, as well as for testing new ideas;
- Machine Learning – for text analytics to monitor regulatory compliance and sentiment analysis for monitoring culture and behaviour;
- Robotic Automated Processes (RPA) – robots to replace laborious risk assessments & reviews;
- Blockchain Distributed Trust Systems – to obsolete Cybersecurity & Supply Chain risk;
- Bayesian Decision Networks – to provide operational management with decision marking collateral based on Scenario Analysis of risk events
By applying there to ERM, risk management can move from an overhead to value-adding.
And AI base Risk Management covers more than bringing Quantitative Risk Analysis (QAR) up to date. This blog will look at how AI can be applied across the whole gamut of Governance, Risk and Compliance (GRC).
AI based Governance
There are applications in Governance, covering Strategic Management, Leadership, Risk Culture, Ethics and Social Responsibility. For example, we will look at how using Game Theory, Sentiment Analysis, and Model Explainability can improve strategic decision making and risk culture.
AI based Risk
In addition to QAR and predictive analytics, AI based Risk Management turns Risk Registers into valuable proactive tools. Applications include using crowd sourcing, scenario analysis, Bayesian modelling, IoT, Blockchain, horizon scanning and Deep Learning. This includes all aspects of the risk process including risk identification, analysis, evaluation, treatment, and aggregation.
AI based Compliance
And finally targeted Compliance including risk based auditing, capability management, and managing substantial change. Reposition compliance from a overhead to a tool for continual improvement and innovation. For this we will look at using risk network mapping, Big Data, Text Analytics, neural networks, and predictive analytics.
We will look at the issues from both an executive’s management perspective and a CRO’s operationally perspective. That is, both how to do it and what has to be set up within an organisation to ensure success. Obviously, change requires staff buy-in, so we will look at how to develop trust in new technologies, and how to achieve quick wins, that will support change. Finally, we will source articles and reference material for a wide range of sources, so you can build your own specific future ERM.
About the Author
Gregory M. Carroll has extensive experience using these techniques to replace the inadequate risk matrix and heat map methods of managing risk. They have been employed at the likes of Australian Dept. of Defence, Victorian Infectious Diseases Labs, and Motorola.
Managing uncertainty (risk) today is not a management technique but a survival skill. Fortunately, a swathe of modern technologies and practices are available to give you more than a fighting chance. Welcome to Mastering 21st Century Enterprise Risk Management.