Sustainable banking in Indonesia: Leveraging risk management practice and artificial intelligence integration to enhance sustainable performance

Abstract

The Indonesian banking industry faces ongoing challenges in maintaining resilience while achieving sustainable performance, particularly in enhancing governance, risk management, and compliance. This study aims to develop a strategic model to improve sustainable bank performance by strengthening risk management practices through the integration of artificial intelligence (AI). Additionally, it investigates the moderating effect of environmental volatility on the relationship between risk management practices and sustainable performance. The research focuses on commercial banks in Indonesia categorized under KBMI II, III, and IV, with data collected from managerial-level respondents, including C-level executives, Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents, and managers. Using convenience sampling, a total of 117 valid responses were gathered through a 36-item online questionnaire and analyzed using partial least squares structural equation modeling (PLS-SEM). The findings reveal that AI integration significantly enhances risk management practices, which in turn positively affect sustainable bank performance. However, environmental volatility exerts a minimal moderating effect on this relationship. These insights suggest that Indonesian banks should adopt a comprehensive and technology-driven approach to enhance long-term sustainability.