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Responsible AI in the Financial Services Sector: Unveiling the EDGE Principles to Enhance Risk Management

The partnership between OSFI and GRI created the Financial Industry Forum on Artificial Intelligence (FIFAI) which gathered Canada’s financial services experts from industry, government and academia. FIFAI culminated in the release of the EDGE principles (Explainability, Data, Governance and Ethics) for the responsible application and regulation of AI in the financial services.
Mizdrak highlighted AI’s potential to enhance business productivity and efficiency through data processing, but cautioned about inherent risks such as bias, content manipulation, and those related to the complexity of algorithms. She emphasized that the principles are based on risk management best practices and meant to assist institutions in evaluating AI systems by offering a consistent approach for assessing risks and benefits. She also stressed the need for regulatory efforts to keep up with the rapid pace of AI development through an iterative process.

Rubtsov went on to summarize the EDGE principles. The Explainability of a given AI system or function is critical to building and maintaining trust between a financial institution and its customers, but must be balanced with the need for confidentiality. The Data principle emphasizes data quality, consent, and privacy, with employee training reducing associated risks. Governance should be adaptable and reflect use cases, drawing on multi-disciplinary expertise. Ethics depends on business culture and societal values, with legal obligations requiring careful consideration.

The EDGE principles can be an important tool for financial institutions grappling with new opportunities to employ AI. Mizdrak concluded by affirming the regulator’s commitment to ongoing collaboration with various industry stakeholders, domestic and international peers, academia, and the private sector. The goal is to foster connections and develop additional AI guidance in the near future.



Romana Mizdrak, Managing Director at Office of the Superintendent of Financial Institutions

Romana Mizdrak
Managing Director, Risk Quantification, OSFI

Romana Mizdrak is Managing Director, Risk Quantification at the Office of the Superintendent of Financial Institutions. With nearly 20 years in the financial services sector in Toronto, she has worked in various technical roles related to model risk management including quantitative analysis, risk monitoring, and model validation. In her current role, Romana leads a team responsible for review and approval of regulatory capital models, assessment of model risk at the enterprise level, and industry-wide risks and/or sector specific trends and developments related to model risks and use of advanced analytics. Romana holds an M.A. in Mathematics and Statistics from York University of Toronto, and a Graduate Diploma in Financial Engineering, also from York University.


Alexey Rubtsov headshot

Alexey Rubtsov
Senior Research Associate, Global Risk Institute

Alexey Rubtsov is a Senior Research Associate at the Global Risk Institute and a tenured Associate Professor of Mathematical Finance at Toronto Metropolitan University. His areas of focus are AI, systemic risk, climate change risk, and asset allocation. His academic research was published in the Journal of Banking and Finance, Journal of Economic Dynamics and Control, and Annals of Finance, among others. He holds a PhD in Operations Research and an MSc in Financial Mathematics from North Carolina State University.

He has been a reviewer for leading journals in finance and economics as well as a member of scientific committees for workshops on such themes as climate change and AI.