Rapid advancements in artificial intelligence (AI) and the implications for governance and board oversight are front and centre.
The era of AI has begun with startling speed. AI and machine learning are progressively shaping business strategies and operations, with increasing demands – from customers, regulators, and other stakeholders – for greater transparency into how these data-driven technologies and algorithms are being used, monitored, and managed.
Specifically, they want to understand how companies are addressing the risks associated with AI systems – risks such as algorithmic biases in healthcare scoring and access to healthcare services; job application vetting and recruiting and hiring practices; loan credit decisions; privacy violations; cybersecurity; disinformation and deepfakes; worker monitoring; and more recently, the risks posed by generative AI.
Despite the explosive growth in the use of AI systems and increasing concerns about the risks these systems pose, many organisations have yet to implement robust AI governance processes. In a recent global survey of more than 1,000 executives, by BCG and MIT Sloan Management Review, an overwhelming majority (84 percent) said that responsible AI should be a top management priority. Yet, just 16 percent of their companies have mature programs for achieving that goal.1.
Notably, a recent KPMG survey found that relatively few C-suite executives are directly involved in, or responsible for, strategies to manage AI risk and data/model governance, including establishing new processes or procedures (44 percent), reviewing AI risks (23 percent), and developing and/or implementing governance to mitigate AI risk (33 percent).2
Given the legal and reputational risks posed by AI, many companies may need to take a more rigorous approach to AI governance, including:
- monitoring and complying with the patchwork of rapidly evolving AI legislation
- implementing emerging AI risk management frameworks
- securing AI pipelines against adversarial threats and
- assessing their AI governance structure and practices to embed the guardrails, culture, and compliance practices that will help drive trust and transparency in tandem with the transformational benefits of AI.
The goal is often referred to as “ethical” or “responsible” AI – that is, making AI systems transparent, fair, secure, and inclusive. Below, Ryan McCarthy of our Board Leadership Centre offers comments on these four areas of board focus.
Monitoring and complying with evolving AI legislation
In addition to general data privacy laws and regulations, we are now seeing the emergence of AI-specific laws, regulations, and frameworks globally. For example, the EU’s Artificial Intelligence Act appears to be on the path to becoming law, perhaps by the end of 2023. The act may set a precedent for future risk-based regulatory approaches, as it would rank AI systems according to their risk levels and ban or regulate AI systems based on those risk levels.
In the UK however, there is no similar legislative framework and the UK Government announced that they wish to avoid heavy-handed legislation that could stifle innovation, choosing instead to empower existing regulators to prepare tailored, context-specific approaches that suit how AI is used in each specific sector.
Monitoring and complying with evolving AI legislation and regulation will be a key priority for companies over the next year.
Eight core principles to guide responsible AI
Ensure models are equitable and free from bias. AI should not discriminate against individuals or create unfair outcomes.
Ensure AI can be understood, documented, and open for review. Organisations developing and deploying AI should be able to communicate when and how it is used and explain a system’s decision-making process, in an appropriate level of detail, that matches the risks posed by the use of the AI
Ensure mechanisms are in place to drive responsibility across the lifecycle. Measures are needed to ensure there is appropriate oversight of the way AI is being used and clear accountability for the outcomes.
Safeguard against unauthorised access, corruption, or attacks. AI should function in a secure, safe and robust way, where risks are carefully managed.
Ensure compliance with data privacy regulations and consumer data usage e.g., the EU General Data Protection Regulation.
Ensure AI does not negatively impact humans, property, or the environment.
Ensure data quality, governance, and enrichment steps embed trust.
Ensure AI systems perform at the desired level of precision and consistency. People need to have clear routes to dispute harmful outcomes or decisions generated by AI.
Implementing emerging AI risk management frameworks
AI risk management has been a particular challenge for many companies, and the potential use of generative AI has now created a sense of urgency. While there are various standards and best practices to help organisations manage the risks of traditional software or information-based systems, the risks posed by AI systems present new challenges.
In the US, to help companies address these challenges, the National Institute of Standards and Technology (NIST) published its AI Risk Management Framework, which is intended for voluntary use to help organisations evaluate and address risks in the design, development, deployment, and use of AI systems, to increase their trustworthiness.
Given the critical importance of AI risk management, boards should have their management teams assess whether the AI Framework can provide helpful guidance in building or enhancing the company’s AI risk management structure and processes.
Securing AI pipelines against adversarial threats
Given the current AI arms race, companies need to have processes in place for securing and hardening AI pipelines against adversarial threats.
In addition to ethical and bias considerations that may inadvertently come from developing AI systems, consider the threats and impacts from adversarial attacks, including data poisoning, model poisoning, back doors, insider threats and other ways that attackers might damage the company’s decision-making systems. Indications are that adversaries are arming themselves with tools to attack AI systems and profit from a lack of humans in the loop.
Assessing AI governance structure and processes
Delivering on the promises of AI while managing the risks requires robust AI governance structures and processes, aligned with the company’s broader risk management, data governance, and cybersecurity governance processes.
To this end, in addition to the areas mentioned above, we recommend that boards discuss the following issues:
- The need for (or adequacy of) a cross-functional management steering committee to establish policies and guidelines regarding the company’s development, use, and protection of AI systems and models. How and when is an AI system or model – including the use of third-party generative AI services – to be developed and deployed, and who makes that decision? Benchmark the role, composition, and policies of such a steering committee against industry best practices.
- What AI systems and processes has the company deployed, and which are the most critical?
- What regulatory compliance and reputational risks – including biases – are posed by the company’s use of AI? How is management mitigating these risks?
- How is management coordinating its AI governance activities with its cybersecurity and broader data governance activities?
- Does the organisation have the necessary AI related talent and resources?
- Are the company’s AI systems transparent, fair, secure, and inclusive – i.e., ethical and responsible – and consistent with the company’s purpose, values, and sustainability commitments?
- Are the broad, potentially game-changing implications of AI – for the company’s industry, business model, and long-term viability and competitiveness – being factored into strategy discussions?
Footnotes
1 Elizabeth M. Renieris, David Kiron, and Steven Mills, “To Be a Responsible AI Leader, Focus on Being Responsible,” MIT Sloan Management Review and Boston Consulting Group, September 2022
2 Responsible AI and the Challenge of AI Risk, 2023 KPMG U.S. AI Risk Survey Report
Get in touch
If you have any queries about AI, and its implications for governance and board oversight, please contact Ryan McCarthy of our Board Leadership Centre. We'd be delighted to hear from you.
Ryan McCarthy
Partner, Board Leadership Centre Lead
KPMG in Ireland
