Technology-Driven Financial Risk Management: Exploring the Benefits of Machine Learning for Non-Profit Organizations

Abstract

This study explores how machine learning can optimize financial risk management for non-profit organizations by evaluating various algorithms aimed at mitigating loan default risks. The findings indicate that ensemble learning models, such as random forest and LightGBM, significantly improve prediction accuracy, thereby enabling non-profits to better manage financial risk. In the context of the 2008 subprime mortgage crisis, which underscored the volatility of financial markets, this research assesses a range of risks—credit, operational, liquidity, and market risks—while exploring both traditional machine learning and advanced ensemble techniques, with a particular focus on stacking fusion to enhance model performance. Emphasizing the importance of privacy and adaptive methods, this study advocates for interdisciplinary approaches to overcome limitations such as stress testing, data analysis rule formulation, and regulatory collaboration. The research underscores machine learning’s crucial role in financial risk control and calls on regulatory authorities to reassess existing frameworks to accommodate evolving risks. Additionally, it highlights the need for accurate data type identification and the potential for machine learning to strengthen financial risk management amid uncertainty, promoting interdisciplinary efforts that address broader issues like environmental sustainability and economic development.