Trustworthy AI in Financial Risk Management: Applications for SME Compliance, Consumer Protection, and Audit Readiness
DOI:
https://doi.org/10.63282/3050-922X.IJERET-V7I1P139Keywords:
Trustworthy AI, SME Compliance, Ethical Governance, Consumer Protection, Regulatory Compliance, Bias DetectionAbstract
The digital revolution that is taking place rapidly in the financial sector brings about the incorporation of AI in risk management, compliance, and decision-making. As financial institutions and other small and medium-sized enterprises (SMEs) increasingly depend on AI to assess creditworthiness, detect fraud, report to regulators, and manage portfolios, the question is whether such systems can be trusted. This paper will explain the origins, usage, and regulation of Trustworthy AI in Financial Risk Management. It describes the main principles, including fairness, transparency, accountability, privacy, security and robustness and addresses the issue of bias, explainability, regulatory alignment, and model risk. The paper also addresses AI-based compliance solutions as used by SMEs and their contribution to efficiency enhancement, enhanced efficacy with regulations, and audit preparedness. It also emphasizes ethical governance, consumer protection and AI assurance systems required to keep the finances stable and to trust the people. The paper offers an automated approach to simulating responsible and sustainable AI systems in dynamic financial environments by incorporating the lifecycle management, documentation standards and perpetual validation or practices. The findings demonstrate the need to strike the appropriate balance between innovation and regulation, ethical protection. Finally, the study will contribute to the development of AI-based financial risk management solutions that are resilient, open, and compliant.
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