Enhancing risk analysis with GNN: Edge classification in risk causality from securities reports

Abstract

In the evolving business landscape, the scope of risk factors is extremely wide, making it impossible for all business-related risks to be captured within publicly available financial disclosures. Previous studies have predominantly focused on understanding causal relationships and risk chains based on the risks that are explicitly documented. Thus, risks that are not explicitly listed are often overlooked. The aim of this study was to analyze risk chains and extract implicit information from disclosed documents. We focused on edge classification and suggested suitable labels for the edges of a risk chain graph. Furthermore, we proposed an edge-type classification in heterogeneous graphs using Graph Neural Networks (GNN). This was accomplished by defining six risks and constructing risk-chain graphs. The outcomes demonstrated the edge-type classification proved to be an effective approach compared with existing method. This method holds the potential to aid investors in enhancing their profits and making more informed decisions.

Keywords

• Financial text mining
• Risk chain graph
• Graph Neural Network
• Information extraction