RISK MANAGEMENT AND DEVELOPMENT OF AUDIT MECHANISMS IN THE DIGITAL BANKING ENVIRONMENT

Abstract

 The article examines the classification of risks in the digital banking environment, methods for their management, and the development directions of audit mechanisms. Along with traditional banking risks (credit, market, liquidity, operational, strategic, reputation, and project risks), new risks that have emerged in the era of digitalization – cyber risk, technological dependence, digital reputation, and legal risks – are systematically analyzed. Along with traditional approaches to risk management in the banking sector (capital adequacy, diversification, insurance, and limits), the importance of using modern technologies – artificial intelligence-based monitoring systems, RegTech solutions, and continuous audit mechanisms – is shown. The study also compares international practices in IT audit and cyber risk audit and assesses their application possibilities for the Azerbaijani banking sector. The results show that for the sustainable development of banks and financial stability, it is important to apply modern risk management approaches, strengthen audit functions, and expand cybersecurity measures