Navigating the challenges of AI-based risk scoring systems

Posted on 24th September 2024

Written by Jonny Cooper, Presales and Propositions AI Lead, Sopra Steria Next

AI-based systems have become integral to various industries, particularly those that rely heavily on data-driven insights, such as finance. These systems offer significant opportunities for organisations of all sizes, and across all sectors, enabling them to harness vast amounts of data to drive innovation, optimise operations, and enhance decision-making.

Many of these systems use a risk-based output approach, offering users additional insight without making decisions on their behalf. While this can be a powerful tool, it also brings a set of challenges that must be addressed to ensure these systems are effective, reliable, and trustworthy in production environments.

In this post we’re going to talk through these challenges and how you can navigate them.

Lack of interpretability

One of the biggest issues with AI-based risk scoring systems is their lack of interpretability.

Opaque models: Many risk scoring models, especially those utilising complex machine learning algorithms, function as ’black boxes’. Users often find it difficult to understand how scores are generated, leading to a lack of trust in the system. This can hinder the widespread adoption of AI systems, as users prefer models that are transparent and explainable.
Regulatory compliance: In industries such as financial services and healthcare, where decisions can have serious consequences, being able to explain how a decision was made by an AI system is not just desirable — it’s often a legal requirement. Black box models that cannot provide clear explanations for their outputs may fail to meet these regulatory standards.

To navigate the challenges of interpretability, it’s crucial to prioritise the development of transparent and interpretable models, ensuring that users can trust and confidently adopt AI systems. Additionally, collaborating closely with regulatory bodies to ensure AI models meet legal standards for transparency and accountability is crucial.

Limited contextual understanding

Risk scores typically provide a snapshot based on specific input data, but they often lack the contextual depth needed for complex decision-making.

Static analysis: Risk scores are generally static assessments that do not account for dynamic factors or changes in context over time. This limitation can lead to outdated or inaccurate risk evaluations, especially in fast-moving environments.
Complex interdependencies: Real-world situations are rarely straightforward. They involve intricate interdependencies and nuanced contexts that a simple risk score might not capture. As a result, the insights provided by these models can be too narrow to be fully actionable.

To navigate the challenges of limited contextual understanding, it’s important to incorporate data in a dynamic manner and build real-time analysis into risk models, allowing them to adapt to changing environments.

Bias and fairness issues

AI systems are only as good as the data they’re trained on, and this data can carry inherent biases.

Data bias: Risk scoring models can enhance biases present in their training data, leading to outcomes that may be unfair or discriminatory. This is particularly concerning in sensitive areas.
Equity considerations: Ensuring that risk scores are fair across different demographic groups is a significant challenge. Without careful design and continuous monitoring, these models can inadvertently reinforce existing inequalities.

It’s crucial to implement a robust bias detection and mitigation strategy, while continuously monitoring and refining models to ensure equitable outcomes for all users.

Scalability concerns

As AI systems move from pilot phases to full-scale production, scalability becomes a critical issue.

Performance bottlenecks: Generating risk scores in high-volume environments can strain computational resources, leading to performance bottlenecks. This can be particularly problematic in industries that require rapid processing of large data sets, such as finance or e-commerce.
Real-time processing: Many production environments require real-time or near-real-time data processing. Some risk scoring models may not be optimised for such rapid processing, resulting in delays that can be costly or even dangerous in certain contexts.

It’s essential to optimise models for high-performance computing. Leveraging distributed processing techniques ensures that risk scores can be generated efficiently, even in real-time, high-volume environments.

Integration and deployment challenges

Deploying AI-based risk scoring systems into existing production environments is often a complex task.

System integration: Integrating these models into existing systems requires robust APIs and middleware to ensure smooth communication between different components. This can be a complex and time-consuming process, particularly in legacy systems.

It’s crucial to invest in flexible, modular architectures and thorough testing, ensuring seamless integration with existing systems and minimising disruptions during deployment.

Accuracy and reliability

The accuracy of risk scoring models is crucial, especially in high-stakes industries.

Model drift: Over time, the data landscape can change, causing the accuracy of risk scoring models to degrade—a phenomenon known as model drift. Continuous validation and retraining are necessary to maintain the reliability of these models.
Error margins: Even small inaccuracies in risk scoring can have significant consequences. In critical applications, these errors can lead to adverse outcomes, making accuracy a non-negotiable requirement.
It’s critical to implement continuous monitoring, regular model updates, and stringent validation processes, ensuring that risk scoring models remain precise and dependable over time.

User acceptance and trust

For AI systems to be widely adopted, users must trust the insights they provide.

Trust issues: Users are often sceptical of relying solely on risk scores, particularly when they don’t understand how these scores are derived. Transparency and education are key to building trust in these systems.
Decision support: In many cases, risk scores should be integrated into broader decision support systems rather than being the sole basis for decisions. This approach allows for human oversight and the incorporation of additional contextual factors that the AI might not consider.

Building trust requires transparency and clear explanations of how risk scores are generated. Integrating these scores into broader decision support systems allows for human oversight and a more balanced approach to decision-making.

Ethical and legal considerations

As AI systems become more prevalent, ensuring ethical use and legal compliance is essential.

Accountability: It’s crucial to establish clear accountability for decisions made by AI systems. This requires models that are transparent, auditable, and designed with accountability in mind.
Privacy concerns: The data used to generate risk scores often includes sensitive personal information. Ensuring privacy and data protection is extremely important, particularly in light of increasing regulatory scrutiny.

Ensuring accountability and protecting privacy requires transparent, auditable models and robust data protection measures, especially in the face of growing regulatory scrutiny.

A path forward with ODE

While AI-based risk scoring systems offer valuable insights, they are not without their challenges. These systems must be part of a broader, more comprehensive solution that addresses the issues we’ve highlighted above

Although historically no single approach has solved all of these challenges, our Optimised Decision Engine (ODE) solution provides the answers needed. Due to ODE’s ability to output human interpretable outcomes using its patent pending AI engine, organisations can deploy a solution which both complements and enhances their existing AI and Machine Learning outcomes, while addressing the considerations outlined in previous sections. This results in system that is not only more accurate and reliable but also more transparent, fair, and aligned with user needs and expectations.

Ultimately, the key to successful AI integration lies in balancing advanced technology with human oversight, ethical considerations, and a deep understanding of the context in which these systems operate. Only then can we fully harness the potential of AI in production environments while minimising its risks.

Originally posted here