Last year I traveled to Boston with our partner CBIZ, to speak at the Risk Management Association’s Governance, Compliance and Operational Risk Management (GCOR) Conference. My keynote, “Compliance in an Exponential World: The Role of Artificial Intelligence and Curated Crowdsourcing in the Future of Compliance,” discussed why the “Smart Banking Crowd” may actually lead to better compliance results than Artificial Intelligence.
While very powerful, Artificial Intelligence (AI) is often misunderstood and broadly applied to solve problems that may not be a fit for the technology. In banking and finance, compliance pressure and the associated costs have grown exponentially in recent years instigating a search for effective solutions. Unfortunately, AI is becoming the hammer used against almost every compliance nail.
AI can be very effective at solving problems that involve well-tested heuristics and fairly predictable data sets. However, there are several classes of problems that don’t behave well for AI. For example, when the data set is dynamic, the transactions grow exponentially and rules change frequently, we must search for other solutions. This is the case for several compliance problems facing banks and financial institutions. For example, Third Party Risk management has dynamic data, incomplete data and a rapidly changing set of rules.
Traffic is an example of a problem where the information is changing rapidly and randomly. WAZE is a traffic and navigation application that provides real-time intelligence on road hazards, traffic jams, police and gas prices. WAZE works very well. WAZE works so well because it is more than an application, it is a community working for a common goal: outsmart traffic. It polls the drivers in a geographic area to provide accurate and actionable data. It’s not a random crowd like YELP! or other reviewing applications, it is a curated “smart crowd.” The power of the “SMART CROWD” beats AI because AI uses algorithms to predict while the SMART CROWD uses real-time data to deliver the actual situation.
At Trust Exchange, we have built a business information gateway comprised of communities of “Smart Crowds” to help solve big problems. Imagine if the smartest risk professionals in banking and finance could easily share their intelligence the way drivers using WAZE work together for a common goal.
Right now, the Trust Exchange platform is being used to solve a very difficult problem for financial institutions: Third Party Risk Management. We are reducing the cost of creating and managing third-party risk programs by 50–80% by leveraging the smart risk crowd.