CHAPTER 21 Cognitive Technologies

The most forward‐looking risk organizations are looking to the new class of IT innovation known as cognitive computing to fast forward their risk management capabilities. Cognitive systems mimic how humans reason and process information.1 Rather than being explicitly programmed, they learn and reason from their interactions with us and the wider environment.2 There are a number of related terms that are captured within this category, including machine learning, natural language processing, artificial intelligence, behavioral/sentiment analysis, and voice recognition.

Today, organizations that prioritize innovation can analyze data in more powerful ways to identify emerging risks and new regulatory requirements more quickly and accurately. Those organizations that have outsourced certain repetitive tasks have nurtured a rich risk talent pool to focus on solving difficult analytical questions. They will be able to make the best use of new analytical tools, and be more sophisticated in managing key risk categories such as anti–money laundering, capital market manipulation, insider trading, and potential global market dislocations. In the future, managing these risks with such tools should become more like managing the traffic of a busy city: Jams will surely occur, but they won't lead to major take‐downs.

We will review here two use cases for cognitive technologies: trade surveillance and regulatory compliance management. Both of these will ...

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