Financial Risk Monitoring and Early-Warning System in the Context of Digital Transformation

Abstract

Currently, the digital transformation of the financial industry in China has moved from multiple breakthroughs into a new stage of deepening and high-quality development, which necessitates a collaborative governance mechanism that coordinates multiple parties including governments, enterprises, and individuals. In view of the new, complex, and potentially harmful financial risks arising in the context of digital transformation, the financial industry urgently needs to improve its financial risk monitoring and earlywarning capabilities to effectively protect financial security. This study analyzes the progress of digital transformation of the financial industry as well as the implications and characteristics of new financial risks through literature research and theoretical analysis. It also investigates the mainstream financial risk monitoring and early-warning technologies in China and abroad, and clarifies the prominent problems regarding risk characterization and recognition, transmission and tracking, and inference assessment. Furthermore, we propose the overall framework, innovative research methods, and improving paths for the financial risk monitoring and earlywarning system in the context of digital transformation. This study reveals that financial risks have new characteristics in the context of digital transformation, such as faster update and iteration, higher risk frequency, and stronger concealment. Existing financial risk monitoring and early-warning technologies have numerous deficiencies and face multiple challenges in dealing with new financial risks, such as difficulty in characterizing, tracking, and assessing risks. Therefore, to improve the financial risk prevention capability of China and guarantee national financial security, it is proposed to develop cross-industry sharing standards for financial data, establish a knowledge representation paradigm and a cross-industry transmission mechanism of financial risks, and build a large model regarding financial risk monitoring and early warning.

Keywords

• financial industry
• digital transformation
• financial risk
• monitoring
• early warning
• machine learning
• data mining