Generative AI: value, risk and regulation

As featured on BusinessMirror: Generative AI: value, risk and regulation

In the last few months, generative Artificial Intelligence (AI) has become a global sensation. Predictions of its potential impact on society, employment, politics, culture, and business fill the media and the internet. Business leaders are intrigued by the possibilities and are convinced that generative AI is truly a game-changer.

Across industries and functions, generative AI is ranked as top emerging technology. Marketing & sales, Finance & Accounting, Corporate Governance and M&A strategy are priority functions where organizations are envisaged to invest the most on generative AI. Also, increasing prioritization of Risk Management is seen as a critical aspect for AI adoption. Cyber Security and Data Privacy are the top risks that business leaders are concerned with. But, as with many emerging technologies, the path from buzz to business value while managing risk is not simple or straightforward.

To steer industries toward responsible action around AI broadly, governments around the world have proposed regulations such as EU AI Act and the US AI Bill of Rights that require businesses to consider consequences of adopting AI technology alongside opportunities. In the Philippines, there is a lack of laws that centralize AI guidelines, but an Artificial Intelligence Development Authority (AIDA) Bill is in the works.  

Business leaders are highly interested in the capabilities and opportunities generative AI can unleash and believe it has the potential to reshape how they interact with customers, run their workplaces, and grow their revenue.

In the 2023 KPMG Generative AI Survey, it was found that regardless of sector or function, 74 percent rank generative AI as the emerging technology that will have the biggest impact on the business over the next 3 to 5 years, ahead of other trending technological capabilities such as advanced robotics, quantum computing, augmented reality/virtual reality (AR/VR), 5G, and blockchain.

Transforming business processes using generative AI precursors like machine learning and automation requires breaking them down into their individual component parts and applying strategic thinking around what components to accelerate or optimize. As such, they mostly impact business processes with point solution approaches designed to solve a single problem.

Generative AI changes the game. Processes do not need to be broken down because generative AI tools can apply the large variety of human knowledge, experiences, and common sense embedded into their models to fill the gaps. This creates immense opportunity to apply and scale the technology across real-world enterprise-wide business processes. Businesses recognize generative AI’s potential. Generative AI technology is in the midst of a meteoric rise and is now reaching an inflection point. The market has evolved to the point that large companies in basically every industry can no longer ignore it and are now springing into action.

The risks posed by generative AI models are broad and complex, spanning multiple areas of the business, from privacy and security to compliance and ethics. Billions of dollars could be wasted if enterprises place bets on wrong tools, applications, or use cases, or fail to weave initial pilot projects into their ways of operating. Customers could be alienated, and brands could be ruined, by an unsupervised generative AI algorithm spewing out immoral or erroneous advice. Anxiety could rise among employees who feel threatened by the possibility of technological displacement or confused by the changes in their normal work routines brought on by generative AI tools. Businesses could run afoul of global laws and regulations if a generative AI bot exposes sensitive or confidential information or intellectual property.

As highlighted in the 2023 KPMG Generative AI Survey, the vast majority of respondents (92 percent) rank their concerns about the risks of implementing generative AI as moderately to highly significant. The top risk management and mitigation focus areas— those selected by the greatest percentage of survey respondents as high priorities— are cybersecurity (53 percent), privacy concerns with personal data (53 percent), and liability (46 percent).

The Philippine AI Bill aims to develop and implement a national AI strategy and assigns AIDA to be the “watchdog” against the risks associated with AI technology.