AI-enabled Forecasting, Risk Assessment, and Strategic Decision Making in Finance

Abstract

The integration of artificial intelligence (AI) into financial services has fundamentally transformed how institutions approach forecasting, risk assessment, and strategic decision making. This review examines recent developments in AI-enabled financial applications, with particular emphasis on machine learning (ML) and deep learning (DL) methodologies. Financial forecasting has evolved from traditional statistical models to sophisticated neural network architectures capable of processing vast amounts of structured and unstructured data. Risk assessment frameworks now incorporate advanced AI algorithms that can identify complex patterns and anomalies in real-time, significantly enhancing predictive accuracy and regulatory compliance. Strategic decision making has been revolutionized through the deployment of reinforcement learning (RL) and natural language processing (NLP) systems that analyze market sentiment, optimize portfolio allocation, and generate actionable insights. This paper synthesizes current research on AI applications across these three critical domains, examining the methodologies, performance benchmarks, and practical implementations. The review also addresses persistent challenges including model interpretability, data quality requirements, regulatory constraints, and computational complexity. Through comprehensive analysis of recent literature, this study identifies emerging trends such as explainable AI (XAI) in finance, hybrid modeling approaches, and the integration of alternative data sources. The findings suggest that while AI technologies offer substantial improvements in accuracy and efficiency, successful implementation requires careful consideration of domain-specific constraints, ethical implications, and the balance between automation and human expertise. This review provides researchers and practitioners with a structured understanding of the current state and future trajectory of AI in financial forecasting, risk management, and strategic decision processes.