Artificial Intelligence and Financial Risk Management: IDLab Seminar
On May 16, 2025, the International Laboratory for the Economics of Intangible Assets (IDLab) hosted another session of its regular academic seminar series, featuring guest speaker Dr. Michael Appiah, Associate Professor at the School of Management and the Department of Finance and Economics at Jiangsu University (China), and Director of Dorstell Research & Consultancy. In his presentation, Dr. Appiah shared the findings of his research on financial risk management in OECD countries, focusing on the role of artificial intelligence (AI) innovation, technological infrastructure, and regulatory quality.
The study covers 24 OECD countries over the period from 1999 to 2020 and explores how AI technologies can transform approaches to financial risk management. Dr. Appiah emphasized that traditional risk management frameworks are becoming less effective amid accelerating digitalization and ongoing post-pandemic economic instability. In this context, AI is emerging as a critical tool for helping financial institutions adapt.
Using one of the most advanced econometric approaches — the high-dimensional fixed effects (HDFE) model — the analysis revealed that AI innovation contributes to reducing credit and regulatory risks, while at the same time potentially increasing market and operational risks. Additionally, financial development was found to be a stabilizing factor, helping to mitigate all four types of risks. Technological infrastructure showed a dual effect: while it reduces credit risk, it may exacerbate market, operational, and regulatory risks. Regulatory quality also plays a significant role — when strong, it enhances the effectiveness of AI in managing risks by ensuring structured oversight and regulatory compliance.In closing, Dr. Appiah stressed that the integration of AI in the financial sector requires more than just technological solutions — it also demands robust institutional frameworks. Without appropriate infrastructure and regulation, AI may not only fail to reduce risks but may in fact introduce new vulnerabilities.
During the discussion that followed, seminar participants noted the relevance and timeliness of the research and suggested further development in the direction of cross-country comparisons and accounting for time lags between technological innovation and its effects on the financial system. Dr. Appiah’s presentation was a valuable contribution to IDLab’s research agenda and provided fresh momentum for future studies in the field of digital economic transformation.