Artificial Intelligence and Risk Management of Deposit Money Banks in Nigeria: Empirical Evidence from Guaranty Trust Bank
DOI:
https://doi.org/10.61143/umyu-jafr.7(1)2024.012Keywords:
Artificial intelligence, Risk management, Financial system, Credit default, Systemic vulnerabilitiesAbstract
Risk management remains a persistent challenge for deposit money banks in Nigeria due to systemic vulnerabilities such as fraud, credit default, and operational inefficiencies. Traditional risk management methods often fall short in effectively identifying and mitigating these risks, resulting in financial losses and instability. Artificial intelligence (AI) presents a transformative opportunity to address these issues by enhancing precision, efficiency, and responsiveness in risk assessment and mitigation processes. However, the adoption of AI in Nigerian banks remains limited, with efforts focused more on infrastructure upgrades than on leveraging AI for advanced decision-making and risk management. The study employed a survey research design, utilizing estimation techniques such as simple percentages and regression analysis to analyze the effect of artificial intelligence on risk management of Guaranty Trust bank in Nigeria. The findings underscore a significant positive impact of AI adoption, AI-driven credit scoring, and AI-based fraud detection on risk management in these banks, emphasizing the importance of integrating AI into operational processes to achieve transformative effects in the Nigerian banking sector. The study recommends that regulators should ensure effective compliance with AI regulations that align with global standards. Additionally, ethical considerations, including data privacy and transaction security concerning AI adoption, should be carefully addressed by banks.
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