Risk modelling revolution: AI, data security and ESG innovation

From exceeding initial team size predictions to coordinating global teams, the Risk Hub at ING Hubs Poland has achieved a remarkable growth. Embracing rigorous data regulations and leveraging AI for enhanced security and efficiency, the Hub sets benchmarks in the financial sector. The development of ESG models further demonstrates its commitment to innovation and sustainability.

You were part of the opening of the Risk Hub. How have your ambitions and visions for the project been fulfilled over the past five years?

We exceeded everyone's expectations, including mine. Initially, we expected a team of about 80-100 people, but now we have more than 400. This growth was driven by our successful project deliveries.

Over the years, we’ve taken on a more global role, not just acting as an outsourced contractor.  We now have product and expert leads in Poland, and we coordinate between international teams, including those in the Philippines, Turkey, and central ING Hubs.

We expect even more global roles in the future, including Global Tribe Lead for the entire Risk Data domain. This progression underscores our significant contributions and the successful fulfillment of our initial ambitions.

Banks and financial institutions are under stringent compliance regulations to ensure data quality and protection related to customers and systems. How does Risk Hub ensure it meets these demands and adapts to evolving regulatory requirements?

Risk Hub operates within a rigorous regulatory environment, particularly focused on credit risk and regulatory capital models, where 80-90% of our work is driven by regulation. Our approach to compliance is multifaceted and begins with robust data governance frameworks. We ensure comprehensive understanding and management of data handling steps, supported by strong data quality controls. These controls are continuously evolving in order to meet changing regulatory expectations, particularly those from the European Central Bank (ECB), which emphasizes data quality and correction of issues that need remediation.

We structure our teams to integrate regulatory compliance seamlessly into our operations. This involves design- ing processes that embed regulatory requirements by default, rather than as an afterthought.

Investment in our team's skill set is crucial. We employ individuals who not only have technical expertise but also a deep understanding of regulations. These experts can translate complex regulatory requirements into practical steps we can follow within the Risk Hub. Furthermore, it is essential to have the ability to communicate well in our field, particularly in interactions with regulators. Concise and precise communication helps prevent misunderstandings and ensures we comply without issue in our operations.

ING adheres to the highest global regulatory standards, including those of the ECB, Polish standards (KNF), and all requirements from markets like the US. This means our operations must meet or exceed all applicable standards. Risk Hub ensures effective risk management and upholds all regulatory standards across jurisdictions.

What are your observations regarding the development of data and cyber security over the past five years? Are AI tools and systems enhancing the bank's ability to manage these aspects more effectively? 

Data and cyber security have become increasingly important, particularly regarding data leakage protection and data access controls. While Risk Hub primarily deals with anonymized or non-personal data, there has been a significant emphasis on tightening rules for accessing data, even extending to internal documentation and preventing insider trading. This heightened scrutiny ensures that sensitive information about performance and client data remain protected. 

AI tools, especially in cybersecurity, have seen a bump in interest. However, the broader application of AI, particularly generative AI, is more complex. Generative AI is treated as anew model type, introducing unique risks that need to be integrated into the bank's overall risk management framework.

We are exploring several AI-driven initiatives to enhance our data management capabilities. One promising area is using AI to understand and map data structures, data flows, and attribute definitions, helping our experts build a complete knowledge base. This can streamline data sourcing and transformation processes.

In summary, while we have implemented stricter data security measures and are leveraging AI for internal efficiencies, we are also mindful of the risks posed by new AI models. Our focus is on carefully integrating these technologies.

What are the newest models and systems you are developing, and how will they benefit both the bank's customers and the company itself?

ESG is gaining significant attention from business, regulatory, and those companies with socially responsible business practices. We are currently developing models related to ESG (Environmental, Social, and Governance). A key area of interest is a client’s environmental risk, particularly as it is linked to a client’s physical location, and their collateral. When making decisions on credit risk, it is crucial to know about these threats to physical infrastructure and assets as well.

Recently, the ECB conducted an inspection into ESG practices at ING. We were the first bank inspected for ESG. The inspection, completed a few weeks ago, concluded that we maintain a strong performance when it comes to ESG reporting and model building. ING's reputation for offering green loans, and our proactive stance on ESG compliance, have set benchmarks for the European banking industry.

For More Interviews with the Team from The Risk Hub at ING Hubs Poland:

Paweł Holnicki-Szulc

Łukasz Światowski

Aneta Ptak-Chmielewska