Machine Learning Techniques with Potential Applications in Risk Management at Small and Mid-Size Business

Abstract

Small and mid-sized enterprises (SMBs) encounter distinct obstacles in risk management because of their resource constraints and the difficulty of recognizing and averting possible risks. By providing creative ways to improve risk management procedures, machine learning (ML) approaches help these companies take proactive measures to control operational, financial, and strategic risks. This study emphasizes how machine learning models may be integrated into risk management frameworks and how they can change the way small and medium-sized businesses make decisions and run their operations. Large datasets can be efficiently analyzed by machine learning algorithms to find trends and anticipate possible hazards. Examples of these techniques include decision trees, neural networks, and ensemble approaches. These models give SMBs predictive insights into market changes, customer behavior, credit defaults, and fraud detection by utilizing historical data and real-time information. Furthermore, unsupervised learning strategies like anomaly detection and clustering make it possible to recognize new threats and unusual patterns that conventional approaches could miss. Utilizing ML in risk management also makes it easier to automate repetitive processes, which lowers human error and improves risk assessment accuracy. Additionally, ML models can be modified to meet particular business standards, providing specialized solutions for industries like retail, healthcare, and finance. This paper covers a variety of credit risk categories, risk analysis models, and machine learning approaches. The final section of the study offers SMBs ways to improve their risk management skills through machine learning. Businesses may obtain a competitive edge, increase resistance to possible hazards, and promote sustainable growth by implementing these technologies. In order to provide SMBs with resilient and adaptable strategies in a business climate that is changing quickly, it is suggested that future research initiatives focus on further exploring the integration of advanced machine learning techniques in risk management procedures.