This study presents a comparative analysis of risk models employed by traditional financial systems and emerging blockchain

This study presents a comparative analysis of risk models employed by traditional financial systems and emerging blockchain-based fintech platforms, with a focus on their respective risk identification, mitigation, and management mechanisms. As fintech innovation accelerates, the growing diversity of financial technologies necessitates a deeper understanding of how risk is assessed and addressed across different paradigms. Traditional financial institutions have long relied on centralized risk models, utilizing historical data, credit scores, regulatory compliance frameworks, and human oversight to evaluate financial, operational, and credit risks. These models are generally characterized by hierarchical structures, standardized reporting, and strict regulatory supervision. However, such systems may struggle with issues of data latency, limited transparency, and operational inefficiencies. Conversely, blockchain-based fintech platforms leverage decentralized architectures, cryptographic protocols, and smart contracts to manage financial transactions and risks. These systems utilize automated, algorithmic risk assessments that incorporate real-time transaction monitoring, distributed consensus mechanisms, and token-based collateralization to mitigate risks. Blockchain-enabled models also offer enhanced transparency, auditability, and immutability of transaction records. Nevertheless, they introduce new risks, such as vulnerabilities in smart contract code, governance challenges in decentralized autonomous organizations (DAOs), scalability constraints, and regulatory uncertainty in many jurisdictions. This comparative study examines the strengths and weaknesses of both models across key risk categories, including credit, operational, market, liquidity, and compliance risks. It further explores the implications of emerging technologies such as decentralized finance (DeFi) and regulatory technology (RegTech) in reshaping risk management practices. The analysis highlights that while blockchain-based systems offer greater automation and transparency, they require robust technical safeguards and adaptive regulatory frameworks to ensure security and resilience. Ultimately, the study underscores the need for hybrid approaches that integrate the robustness of traditional risk models with the agility and transparency of blockchain technologies to create more resilient, efficient, and inclusive financial ecosystems.