The transformative role of AI and machine learning in financial risk analysis

Kasireddy, Janardhan Reddy (2025) The transformative role of AI and machine learning in financial risk analysis. World Journal of Advanced Research and Reviews, 26 (1). pp. 1246-1256. ISSN 2581-9615

The financial sector has undergone a transformative shift through the integration of artificial intelligence and machine learning technologies in fraud detection and risk management. AI-powered systems have dramatically improved the identification of fraudulent transactions compared to traditional rule-based approaches, enabling regulatory bodies and financial institutions to detect sophisticated manipulation strategies that previously remained hidden. These advanced systems process vast volumes of trading data at unprecedented speeds, recognize complex patterns across multiple timeframes, and adapt continuously to emerging market dynamics. Key techniques including graph analytics, anomaly detection algorithms, and natural language processing for sentiment analysis work in concert to create comprehensive surveillance frameworks that transcend conventional monitoring approaches. Despite impressive advancements, significant challenges remain in explainability, adversarial resilience, data privacy, and model bias that must be addressed to fully realize the potential of these technologies in maintaining market integrity.