How AI is being used to revolutionize processes in financial markets

Companies operating in today’s financial markets are well accustomed to macroeconomic volatility. However, public companies and global investment firms have the added burden of operating in an increasingly regulated industry, says Eleanor Weaver, CEO of Luminance.

The sheer volume and complexity of financial regulation, ranging from antitrust and competition law to financial disclosure regulation 2019/2088 related to sustainability, the LIBOR transition and economic sanctions, now poses one of the greatest challenges to corporate legal departments and indeed to businesses today. .

The scale of this challenge is made greater by both the unprecedented volume of data and legal content that must be reviewed during regulatory compliance exercises and by the complex corporate operational structures that often see the relevant data siled in different storage environments, with key information fragmented across different employee computers rather than shared in a common knowledge bank.

AI can understand and recognize concepts as deeply ingrained as LIBOR, which in 2021 was estimated to be the basis of approximately $350 trillion in contracts affecting banks, asset managers, insurers and corporations. »

On top of that, the economic and reputational implications of non-compliance have never been higher – in 2021 alone the FCA imposed fines totaling £567,765,219 for non-compliance .

In this context, the need for AI is crying out. Today, many legal departments and enterprise asset managers still rely on rudimentary tools and traditional “manual” review techniques to locate relevant information in their contract landscape during compliance reviews. regulatory.

Not only do these methods lead to countless inefficiencies, but they also put organizations at significant risk of missing key information and, therefore, non-compliance.

In contrast, AI can read and understand large numbers of legal documents in seconds, present key information to the user, and make recommendations for legal professionals to analyze and potentially act on.

Indeed, the inherent agility of AI is precisely why it is able to scale even with the most changing regulatory sectors.

AI can understand and recognize concepts as deeply ingrained as LIBOR, which in 2021 was estimated to be the basis of approximately $350 trillion in contracts affecting banks, asset managers, insurers and corporations.

With companies still required to review large numbers of contracts to assess LIBOR exposure, AI has proven to be an essential tool in preventing contractual risk and non-compliance, providing legal and financial services an understanding of what the changes related to the LIBOR retirement should bring. be included in their financial documentation.

One such beneficiary was Semperian, a UK-based infrastructure investment and management group which currently has £1.9 billion in assets under management.

Semperian has deployed AI in all of the organization’s contracts to quickly identify LIBOR-related provisions (e.g. LIBOR definition provisions; interest rate definition; law change and LIBOR fallback) and highlight those that needed to be changed.

Reports subsequently generated by the AI ​​then informed Semperian’s LIBOR transition strategy, priorities and process. By deploying AI, the company estimated that it achieved a 90% time saving compared to the equivalent manual due diligence.

The adoption of AI by organizations such as Semperian reflects a broader movement within the financial industry towards adopting next-generation technology.

Following the meteoric rise of Fintech, AI-based legal process automation technology is now emerging as a necessary new business enabler within the financial industry. With technology that can read and analyze documents, companies are able to accelerate the “data shift” to better understand their contract portfolios and make more informed decisions.

Indeed, AI is now a necessary extension of internal legal and financial departments, enabling companies to meet the challenges of the corporate world and ensure that risks are both exposed and quickly mitigated.

We have seen tremendous upheavals over the past few years in terms of regulation, policy changes and pivotal events in the financial industry.

We have seen regulation increase in the wake of recessions and trade scandals, new laws emerge in the wake of Brexit, and the Covid-19 pandemic completely upend global financial markets.

In such an unpredictable world, corporate departments all over the world face vast challenges. AI can help organizations cope with the volume and complexity of regulations, providing a deeper understanding of contractual landscapes and freeing up teams to deal with the other implications these changes bring.

By Eleanor Weaver, CEO of Luminance