Four essential board strategies for maximizing GenAI
Boards play an increasingly pivotal role in ensuring leadership harnesses GenAI’s potential with essential safeguards in place.
Estimated read time: 3-4 minutes
Generative artificial intelligence (GenAI) has lived up to the hype. It’s no longer seen as a potential game-changer. At many companies, it’s now being tapped as a near- and long-term value creator. It’s transforming how teams operate across organizations, bringing significant rewards and risks.
With GenAI’s promise being realized in new ways every day, boards of directors find their charter shifting. No longer can they watch from the sidelines or encourage a “dream big, fail quick” approach to AI innovation. In this brave new world, boards play a crucial role in ensuring that leadership takes a more thoughtful approach. Think Goldilocks: not too hot, not too cold, just right. It’s a balancing act that encourages management to accelerate opportunities while also ensuring that appropriate guardrails and governance processes are in place—and enforced.
Here are four key steps board members can take to ensure the companies they serve deliver on GenAI’s value-creating potential.
Step 1: Establish a clear perspective
GenAI’s buzz has transformed to business value. According to two recent KPMG surveys of leaders at large companies, the focus has shifted from experimental pilots to capturing tangible return on investment, whether through efficiencies or product development.
More than half (51 percent) of these companies are exploring GenAI for multiple use cases, and 20 percent are already scaling the technology across operations.
These leaders expect the trend to accelerate, with two-thirds of C-suite executives saying their company plans to invest over $50 million or more in GenAI in the next year. Among the investment priorities: responsible governance programs, technology acquisition, workforce training, and customer experience.
Step 2: Define the business value
GenAI enhances productivity and creates new business opportunities. Boards must understand how GenAI can transform company operations, products, services, and business models. Here are three things AI can do quickly:
GenAI can knock down time-consuming tasks without complaint or a lunch break: reading documents, summarizing information, drafting new content. By reducing the time spent on routine tasks, employees can focus on more strategic initiatives that drive business growth.
Companies can use GenAI to better understand customer needs and test new features, or they can integrate GenAI functionality into existing products to make them more powerful and user-friendly.
Many companies tiptoed into AI adoption, selecting individual use cases for proof-of-concept pilots. These companies are now encouraging widespread use of GenAI tools, scaling what’s working across the organization.
Step 3: Identify, track, and manage risks
GenAI both giveth and taketh away. Yes, it quickly creates value, but it can equally swiftly generate sophisticated cyber threats, creating the need for an enhanced cybersecurity posture. Boards play a crucial role in ensuring that these risks are identified, monitored, and mitigated.
For example, boards can reinforce the need for robust data quality and guard against data bias. Human oversight remains crucial to validate GenAI outputs, as inaccurate data can lead to flawed decision-making.
Because of GenAI, privacy laws are rapidly changing around the world—and will continue to do so. Compliance is essential, particularly in highly regulated industries like healthcare. In addition, boards must navigate the complexities of intellectual property (IP) ownership and third-party data use. Ensuring that GenAI applications do not infringe on third-party IP rights is critical to avoid legal disputes and potential financial liabilities.
Step 4: Define board-level oversight
Given GenAI’s strategic importance, boards must focus on governance frameworks that ensure responsible and ethical use of GenAI. What does that look like? A few examples:
1
Determine use cases
Establish clear criteria for when and how GenAI models are developed and deployed. Boards should ensure that these criteria align with the company’s strategic goals and ethical standards.
2
Maintain an AI inventory
Track where and how GenAI is being used within the organization. An inventory helps in monitoring the deployment and effectiveness of GenAI applications, ensuring they are used appropriately and effectively.
3
Risk management
Continuously monitor and mitigate GenAI-related risks, ensuring data governance and cybersecurity practices. Effective risk management involves regular assessment and updating of policies to address emerging risks.
4
Regulatory awareness
Stay informed about the evolving regulatory landscape and ensure compliance with applicable laws.
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Navigating GenAI’s risk-reward matrix
Given GenAI’s strategic importance, its oversight should remain at the full-board level, with specific committees (audit, technology, risk) involved as necessary. Boards should prioritize discussions of GenAI’s strategic impact, governance frameworks, risk management, and talent requirements.
Make no mistake: Balancing the opportunities and risks associated with GenAI is a complex responsibility—which is why the board’s role is so essential. By fostering a deep understanding of the technology, establishing robust governance frameworks, and actively managing risks, boards can guide their organizations toward successful GenAI adoption, unlocking significant business value while safeguarding against potential pitfalls.
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