Asset Managers Are Concerned About the Risks That AI Introduces, Clearwater Analytics Research Reveals

Firms are racing to adopt AI, but few have built the data foundation that can reduce the risks that come with it 

BOISE, Idaho, NEW YORK, CHICAGO, LONDON and HONG KONG, Aug 12 – Artificial intelligence is becoming more deeply embedded in asset management operations, but new research from Clearwater Analytics finds that firms are deeply concerned about the risks it introduces, from data governance to regulatory compliance.

Clearwater’s “GenAI and the Data Divide” study, which polled insurance asset managers, hedge funds, private markets specialists, and general asset managers, finds that while AI offers clear efficiency and alpha-generation opportunities, it also introduces new vulnerabilities that firms must actively manage.

Culture and Capability

The most striking finding concerns the gap between adoption and readiness. Nearly two-thirds (62%) of asset managers are concerned they lack the skills and experience to use AI effectively, with 43% describing themselves as very concerned.

More than half (52%) are separately concerned that internal culture and resistance to change will slow adoption and readiness. These findings suggest that for many firms, the biggest barrier to realizing AI’s potential isn’t the technology itself. It could be the organization culture surrounding it.

Technology Risk

At the heart of firms’ AI concerns lies a fundamental question of trust.  Can they rely on what the technology produces?  Two thirds (67%) of asset managers are concerned about data governance, reliability, and integrity risks, while 64% are concerned about operational risks.

Given the increasing number of asset managers using AI to support investment decision making, 64% of those participating in the research say they are worried about model/algorithm transparency, explainability, and bias. In addition, 62% are concerned about hallucinations where AI generates plausible sounding but false information and presents it as true.

Compliance Burden

More than half (55%) of global asset managers say they are concerned about the regulatory risks of AI, with 30% saying they are very concerned. A similar amount (58%) of asset managers are worried about the financial risk from AI, including management of credit, market, and fraud risks. Finally, 64% say they are worried about the implementation costs of AI.

The research also reveals that while many asset managers say they are prepared to manage AI-enabled risks, a notable proportion still have work to do. In particular, 16% of asset managers surveyed say they are not prepared for AI-enabled operational risks, and 15% say they are not ready for risks arising from the lack of AI skill and experience across their organizations.

To help mitigate AI-enabled risks, nearly all (93%) of asset managers surveyed agree that the best approach is to balance human expertise with technology, using AI to augment or empower risk teams rather than replace them.

 Souvik Das, CTO at Clearwater Analytics, said: “What struck me most in this research is how often the same root cause appears, no matter which risk we asked about. Underneath the concerns about skills, culture, governance, and compliance sits one common thread. Firms don’t yet fully trust the data feeding their AI. That’s a natural stage for any technology this new to move through. The firms navigating it well are the ones treating their data with the same care they bring to the technology itself. That’s what turns AI from something people double-check into something they can rely on to tell them the truth about the risk in front of them.”