LEVERAGING ARTIFICIAL INTELLIGENCE (AI) IN PUBLIC SECTOR FINANCIAL RISK MANAGEMENT: INNOVATIONS, CHALLENGES, AND FUTURE DIRECTIONS

Abstract

This paper examines the transformative role of Artificial Intelligence (AI) in enhancing financial risk management practices within the public sector in different context. With the increasing complexity of financial markets and the growing demand for transparency and efficiency in public finance management, traditional methods of risk identification and mitigation are proving to be inadequate. AI and machine learning technologies offer a promising alternative, with their ability to process vast amounts of data, recognize patterns, and predict future trends with a high degree of accuracy. We delve into the application of predictive models for identifying various financial risks, including credit, market, liquidity, and operational risks, and explore how AI algorithms can optimize decision-making processes through scenario analysis, resource allocation, and policy impact analysis. The paper also addresses the challenges associated with integrating AI into public financial management systems, such as data privacy concerns, the need for skilled personnel, and the importance of developing regulatory frameworks that ensure ethical use and transparency. By presenting case studies and real-world applications, this study highlights both the successes and failures of AI implementations in the public sector, providing valuable lessons learned and best practices. As AI technologies continue to evolve, this paper underscores the need for ongoing research and adaptation to fully realize their potential in making public sector financial risk management more proactive, efficient, and resilient.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Mehdi Bouchetara

Mehdi Bouchetara, associated professor in Management Sciences at the Higher National School of Management in Algeria. I am also a researcher at the Lille Center for Sociological and Economic Studies and Research (Clersé) in France. My research topics are: monetary and financial economics, and bank risk management. Currently, I am working more specifically on the regulation and governance of banks, particularly in Algeria and the MENA region. I am also interested in the ecosystem and financing of startups in Algeria.

Messaoud Zerouti

Messaoud Zerouti is a Professor of Economics and Statistics at the Higher National School of Management in Algeria. He holds a Doctorate in Applied Economics and Statistics from the Higher National School of Applied Statistics and Economics in Algiers. His areas of expertise include statistical methods, econometrics, and industrial organization, with a particular focus on the economics of network industries, especially the electricity sector. Pr. Zerouti currently leads a research team on the governance and regulation of public network services and participates in several national research projects. A prolific author, he has published numerous articles in international journals on various topics such as crowdfunding, transfer pricing, and incentive regulation of public monopolies. His research work also extends to renewable energies and innovation in the public sector.

Anaïs Radja Zouambi

Anaïs Radja Zouambi embarked on her educational journey at the Highest School of Management, where she laid the foundation for her academic and professional pursuits. In 2020, she reached a significant milestone by graduating with a Master degree in Entrepreneurship and Project Management. This accomplishment reflects her early dedication to the fields of business and management, setting the stage for her subsequent endeavours in the world of academia and research. Anaïs also had the privilege of being a valuable member of a team at the CREAD (Centre de Recherche en Économie Appliquée au Développement). During her tenure, she actively contributed to significant projects as the Ecocatalyste project. Anaïs is now a dedicated and accomplished PhD student specialising in the field of Strategic Management at the Highest School of Commerce.