U.S. Market Regulators are Increasingly Focused on Systemic Risk possible with AI
In the last 15 plus years we have seen systemic risks cause large impacts throughout the U.S. and Global financial markets. Between the flash crash in 2010 and the system issues Knight Capital experienced - market participants have seen $1 trillion in U.S.
market value loss and $440 million in trading losses respectively due to various forms of systemic risk. Now with the continued rise and rapid evolution of AI in private industry as well as the capital markets; regulators are adding AI to their list of systemic concerns for global financial markets.
This week the head of the US Securities and Exchange Commision (SEC) indicated that AI is most certaintly a new threat to crashing the markets. Per The Register SEC chairman Gary Gensler has said "that the current free-for-all over AI development told the Financial Times such a crash was "nearly unavoidable" unless regulators stepped in to control how the technology is used. He said he was talking to other regulators and the government about how to remedy a potentially catastrophic situation." As market participants, FinTech, and FinServ companies race to integrate AI into their products, their software and their analysis & decision making processes it is essential to include systemic risk assessments for all uses of AI in addition to the more obvious revenue risk/reward assesments for new innovation.
If your company or startup is working to leverage AI to integrate into existing products, access new markets or build a company based on these rapidly changing technologies - we can help. Reach out today and we can assist your FinTech or FinServ company in evaluating AI for your use cases as well as understanding the limitations, risks and opportunities in the short and medium term.
