Asset managers are becoming “deeply concerned” about risks emerging from the growing prevalence of artificial intelligence (AI) across the financial services industry, according to a global survey.
Technology firm Clearwater Analytics polled a range of investment managers working across various asset classes and found that many respondents were concerned about the potential impact of AI on areas such as data governance, regulatory compliance, and reliability.
Two-thirds of the survey’s respondents said they were concerned about data governance, reliability, and integrity risks, while a similar proportion was concerned about operational risks. Regulatory and financial risks were also flagged, as was the cost of implementation.
Other risks flagged by the research included transparency about how AI algorithms and models operate, and “hallucinations”. These occur when an AI generates “plausible-sounding but false information and presents it as true”, as Clearwater explained in a press release.
“Underneath the concerns about skills, culture, governance, and compliance sits one common thread. Firms don’t yet fully trust the data feeding their AI. That’s a natural stage for any technology this new to move through.”
Souvik Das, chief technology officer at Clearwater Analytics, said: “What struck me most in this research is how often the same root cause appears, no matter which risk we asked about.
“Underneath the concerns about skills, culture, governance, and compliance sits one common thread. Firms don’t yet fully trust the data feeding their AI. That’s a natural stage for any technology this new to move through.
“The firms navigating it well are the ones treating their data with the same care they bring to the technology itself. That’s what turns AI from something people double-check into something they can rely on to tell them the truth about the risk in front of them.”
Asset managers were also concerned about their own ability to use AI effectively. Almost two-thirds (62%) of respondents said they were concerned about lacking the skills and experience to use AI effectively, Clearwater found. In addition, 52% were concerned that their firm’s internal culture could slow their adoption of AI technologies through a perceived resistance to change.
A significant minority (15%) said their firms were not ready to address risks that could arise due to a lack of internal expertise in AI.
Earlier this year, a pensions industry poll conducted by the Society of Pension Professionals found that 87% of respondents said AI was being used by their firms in some way. Two in five (41%) said AI would be used in up to 50% of their services within 10 years, with 18% saying they expect it to be used in more than 50% of their services.
Last year, Railpen and Chronos Sustainability published a governance framework for AI to help investors and portfolio companies oversee and manage risks associated with the technology.
