Whitepaper
Agentic AI in Risk & Compliance: from automation to intelligent governance
By Dr. Jochen Papenbrock, Dr. Sebastian Fritz-Morgenthal, Dr. Mark Währisch
Artificial intelligence is profoundly changing banks’ risk management. After years of rule-based automation, the rise of so-called agentic AI systems is opening up a new dimension: AI models that not only analyse, but also independently prepare decisions, prioritize tasks and coordinate processes. This shifts the focus from reactive data evaluation to proactive management of complex risk and compliance processes.
As part of the Artificial Intelligence Round Table, FIRM is addressing the question of how financial institutions can shape this development – with a view to governance, data quality, supervisory capability and cultural requirements. The key finding of the discussions so far is that agentic AI is not technological hype, but a strategic lever for resilience, efficiency, innovation and regulatory security.
Geopolitical risks
By Dr. Til Bünder, Gerold Grasshoff, Emilia Zimermann
The economic structure around the globe is becoming increasingly complex and trade conflicts and military tensions are posing various risks for national economies, companies and financial institutions. In such a situation of uncertainty, proactive risk management is more important than ever for banks. The current FIRM position paper Banks Navigating Global Crises: Analysis of Geopolitical Risks and their Impact on the Financial Sector summarizes what needs to be considered, how scenarios are defined, quantified and appropriate mitigation measures derived.
The authors Gerold Grasshoff, Dr. Til Bünder and Emilia Zimermann look at the potential impact of recent developments in China, the Middle East and the political change of course in the USA. The analysis focuses on German and European banks: how do geopolitical risks affect their credit, market, liquidity, business, sanctions and cyber risks? The position paper offers comprehensive guidelines for dealing with geopolitical challenges in the financial sector.
Artificial intelligence
By Dr. Jochen Papenbrock, Dr. Sebastian Fritz-Morgenthal, Philipp Adamidis
In the position paper “Challenges and opportunities for model risk management”, the authors Sebastian Fritz-Morgenthal, Philipp Adamidis and Jochen Papenbrock describe why the use of artificial intelligence (AI) in banks promises a variety of benefits – from increasing efficiency to improving decision-making. At the same time, the increased use of AI models brings with it new challenges, particularly in the area of model risk management.
Strategies pursued to date require a fundamental overhaul. The position paper examines the regulatory requirements and rules of the European Banking Authority (EBA), the European Central Bank (ECB), the German Federal Financial Supervisory Authority (BaFin) and the EU AI Act. It also shows how the expanded use of AI affects model risk and the challenges and, in particular, opportunities this presents for banks’ model risk management.
ESG – Climate risks
By Dr. Til Bünder, Nicholas Martin
How the climate and energy policies of the EU and the USA affect the economy
The current position paper of the FIRM Round Table ESG examines the climate policy measures of the European Union (EU) and the United States (US) in terms of their impact on economic performance.
The authors Dr. Til Bünder and Nicholas Martin explain how the significantly more ambitious regulations in the EU will affect various economic levels, where opportunities will arise and what risks need to be considered. A comparison of the EU and US climate and energy policies shows that the US is becoming more attractive due to its direct and simple approach to promoting green investments. The EU, on the other hand, is jeopardizing its leading position in the field of green innovation and investment due to its more complex regulation and the fragmentation of financing mechanisms. It is therefore crucial that the EU continues to develop its political framework conditions in such a way that climate targets are achieved and its economic competitiveness is secured at the same time.
Asset Management
Navigating the Future: DLT and Digital Assets
in the Evolving Realm of Asset Management
Emerging technologies such as digital ledger technology (DLT) are revolutionizing numerous industries, including the asset management sector. This white paper analyzes the latest advances in the application of these technologies in asset management and provides an outlook on the digital transformation in the coming years.
The wealth management industry is increasingly using digital assets and DLT to diversify its offering and improve operational efficiency. Institutional interest in digital assets in particular is on the rise, putting them in the spotlight for various investment strategies. The commitment of industry giants such as Goldman Sachs and BlackRock underlines the importance of this trend.
This white paper examines the integration of DLT into asset management, describing the benefits as well as the potential risks. Recommendations for a successful introduction are also given. It shows how DLT can rationalize processes, reduce costs and create transparency within asset management processes, in research, trade processing and risk management.
The paper addresses key areas such as tokenization, trade settlement, risk management and the possibilities of decentralized finance (DeFi). A case study by Bankhaus Metzler on the issue and trading of native crypto fund shares under German law will also be shown. The authors provide an outlook on the impact of the integration of DLT and digital assets on the asset management industry.
Authors: Dr. Christoph Wronka, Jens Hermann Paulsen, Lars Ulbricht (all Deloitte) as well as Hendrik König and Shahrok Shedari (both Bankhaus Metzler)
Professional Articles
Make Peace with Your Front Office
By Dominik Käfer, Dr. Lue Wu, Jens-Peter Nees
Navigating compliance can be a challenging journey for a bank’s front office. Relationship managers often voice frustrations about the escalating demand from compliance tasks such as Know Your Customer (KYC), transaction monitoring or anti-fraud measures. These tasks not only heighten workloads but can strain relationships with clients. Fortunately, it doesn’t have to be this way. By harnessing artificial intelligence (AI), leading banks have shown that compliance and control protocols can be seamlessly integrated into front office’s daily operations and products and a harmonious and productive partnership between the front office and the compliance function is indeed achievable.
Credit rating migration conditional on economic states
By Dr. Michael Kalkbrener, Prof. Dr. Natalie Packham
Point-in-time (PIT) and through-the-cycle (TTC) rating philosophies are both firmly established in credit risk management, yet their conceptual differences are often handled without a unified modelling framework. Based on the recent work by Kalkbrener and Packham [2026], this article provides a formal characterization of PIT and TTC properties in terms of rating migrations and default behaviour, clarifying where cyclicality enters a rating system and how this affects default probabilities over different time horizons. The underlying mathematical model of rating migration processes explicitly conditions credit ratings on economic states to reflect the impact of macroeconomic developments on default rates. A stylised example illustrates how PIT and TTC ratings coexist within a single framework and how their long-run behaviour can be aligned.
Transition Plans in Banking: From Compliance to Strategic Advantage
By Dr. Lukas Figge-Muschalik, Luca Steinhauer, Matthias Hübner
As the shift toward a net-zero economy accelerates, banks face mounting pressure to realign their business models and credit portfolios with the 1.5°C pathway while maintaining financial resilience. Strategic transition planning has therefore become a strategic management task rather than a compliance exercise. Its effectiveness determines whether institutions can translate climate ambition into actionable steering, manage emerging risks and retain credibility with regulators, clients, and investors. At the same time, banks must navigate heterogeneous sectoral pathways, data limitations and the trade-off between long-term resilience and short-term profitability. This article is based on the cluster initiative on transition plans and outlines the key strategic trade-offs, investor expectations and organisational building blocks that banks need to turn transition plans into a strategic management tool [see Sustainable Finance Cluster 2025].
Achieving Artificial Intelligence Return on Investment (ROI) through Value Co-Creation
By Cristina Has
Generative Artificial Intelligence (GenAI) has moved rapidly from technological curiosity to strategic priority in banking. Since 2023, institutions have launched numerous pilots, from internal chat assistants to automated document analysis. While these projects show impressive capabilities, many struggle to turn experimentation into measurable economic value. This gap reflects not technological immaturity, but misalignment with regulatory, organisational, and contextual realities. As hype fades, pressure grows to justify investments with tangible returns.
Ratings under the microscope: how ECAIs shape Banks’ Capital Requirements
By Luca D’Amico, Marco Bonsanto, Dirk Burdorf
Basel III was conceived in response to the weaknesses exposed by the 2008 financial crisis, with the aim of strengthening the resilience of the global banking sector. By introducing stricter capital requirements (coupled also with the EU Capital Requirements Regulation), liquidity standards, and leverage ratios, it seeks to reduce systemic risk and restore confidence in international markets.
In an increasingly globalized and complex world, characterized by exogenous risks, the calculation of capital requirements is not merely a technical exercise but it influences and supports banks in managing and mitigating these risks.
Yearbooks
Yearbook 2026
We are currently experiencing a dynamic of change that is hardly comparable to previous decades. Geopolitical shifts, technological leaps and economic challenges are overlapping and reinforcing each other – leading to a complexity that is becoming increasingly difficult to manage. This applies to politics and the economy as a whole, and to the financial industry in particular. It is required to permanently align its risk architecture with the new developments.
Yearbook 2025
Risk management is a reflection of the issues that affect our society. Because wherever new developments emerge, risks arise. Nowhere is this more evident than in the geopolitical developments that are currently keeping us on tenterhooks. Two years ago, this was still a topic for thought leaders. Today, it is the dominant risk with a direct impact on the economy and society.
Yearbook 2024
In the FIRM Yearbook 2024, we address the current focal points in risk management. More than 50 authors have contributed to the yearbook. They write about cyber risks, cryptocurrencies, artificial intelligence and machine learning, reputation, ESG and governance as well as many other financial and non-financial risk topics. We also report on the work of our Risk Round Tables and present the most recently published position papers.
Yearbook 2023
In the FIRM Yearbook 2023, we show how the dialog between business and science succeeds in practice. With contributions from 50 authors on ESG, payments, cyber risk, artificial intelligence and much more. In addition, reports and position papers from our FIRM Risk Round Tables.
Yearbook 2022
In the FIRM Yearbook 2022, more than 50 authors from business and academia explain in their contributions and studies on ESG risks and taxonomy, cyber risks, consequences of the Corona pandemic, nonfinancial risks, and payments and artificial intelligence in banks, which developments are currently shaping risk management.