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CS Professional · IFSCA - Regulations, Listing and Compliances · Overview of FinTech and Service Providers in IFSC

Vistara Analytics, a FinTech in GIFT IFSC, deploys a machine-learning credit scoring model for a finance company. Auditors find that the model's decisions cannot be explained and it systematically scores applicants from one region lower. Which risk is primarily illustrated?

The case shows algorithmic bias with lack of explainability, which are core AI governance risks. The model discriminates against a regional group and its decisions cannot be justified. Settlement, liquidity and convertibility risks relate to payments, funds and currency rather than the behaviour of an AI model.

  1. AAlgorithmic bias combined with lack of explainabilityCorrect
  2. BSettlement risk in cross-border payments
  3. CLiquidity risk of a money market fund
  4. DCurrency convertibility risk

Explanation

Systematically lower scores for a group indicate algorithmic bias, and unexplainable decisions show an opaque or black-box model. Settlement, liquidity and convertibility risks concern payments, funds and currency, not model governance.

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