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Boards have a responsibility to understand the full range and extent of the risks and opportunities presented by AI.
In brief
- AI has the potential to transform the way organisations operate but boards need to be aware of its risks and limitations.
- It is the board’s responsibility to ensure there is a clear return on investment for the deployment of AI.
- Boards must ensure their organisations are prepared for compliance with new regulations such as the EU AI Act.
The rise of AI’s breakthrough capabilities requires board oversight of the organisation’s policies and strategy now more than ever before. Boards can play a critical role in guiding organisations implement a trusted AI strategy. The advances in artificial intelligence (AI) make it imperative for organisations to script a data strategy that is embedded in trust and boards must know to what extent they can trust the data on which they are expected to base decisions, according to the EY Ireland Trusted Data Report 2023.
Generative AI (GenAI) tools like ChatGPT may be just over a year old, but they have generated a massive surge in interest in all things AI. According to the October 2023 EY CEO Outlook Pulse survey, 99% of global CEOs are planning to invest in GenAI and 70% of them say their organisation must act now on the technology lest they hand a strategic advantage to their competitors. The same number say that GenAI will challenge them to disrupt their own business model to maintain competitive advantage.
However, more than two-thirds (68%) say that the uncertainty around GenAI makes it challenging to move quickly in developing and implementing an AI strategy.
In some ways, this sums up the core challenge facing boards when it comes to the deployment of AI in their organisations. On the one hand, the technology holds extraordinary potential to deliver new efficiencies and competitive gains while on the other it presents risks which are only beginning to be properly understood.
Boards must, therefore, challenge management to explore the transformational potential of GenAI for their organisations and ensure that opportunities are not missed. Boards need to ask if the organisation is deploying AI appropriately and capitalising on its potential to deliver new efficiencies and generate values in key areas such as new product and service development.
Recognise transformational potential of GenAI
AI has been used for several years in many organisations. Use cases vary from customer analytics to route planning tools for delivery vehicles. These discrete and highly controllable use cases have been delivering business benefit for many years. However, the potentially transformative uses to which GenAI can be put has changed the rules of the game quite fundamentally.
One example is a virtual customer assistant that can deliver personalised responses to queries and not simply select from a menu of pre-prepared answers. It can guide a customer in making product or service selections or in resolving post-purchase issues. However, care should be taken due to the potential risk of the virtual assistant giving poor advice. Human oversight will help to address this risk.
Boards, therefore, need to understand the opportunities presented by GenAI, assess its potential uses for the organisation, be clear on the objectives they wish to achieve through its use, and set clear guidelines and policies for where and how it is to be used to best effect within the organisation.
Understand the risks
AI and GenAI present risks ranging from regulatory, through business and financial, to reputational and beyond. The use of AI will increasingly be governed by regulations, including the forthcoming EU AI Act and boards must ensure their organisations’ use of the technology is fully compliant.
There are also risks to the business itself. Malfunctioning systems, such as the credit scoring example, can do untold damage to a business if not uncovered early. At another level, AI controlled production systems need to be closely monitored to ensure they continue to operate as intended.
“At one end of the risk spectrum, GenAI can produce personalised marketing content which is not entirely truthful, and this can do serious reputational damage to an organisation. At the other end, the use of the technology to provide health advice can be dangerous in certain circumstances if not subject to the correct controls. You can’t simply turn GenAI off or decide not to use the technology to reduce or avoid risk, boards must be mindful of the full range of risks when developing policies and frameworks around AI,” said Eoin O’Reilly, Partner, Head of Data, Analytics and AI at EY Ireland.
Another risk of which boards should be mindful is informal GenAI use. Employees may be using GenAI freeware without the knowledge of superiors and be unwittingly oversharing information. Boards should ensure that systems are in place to guard against this.
Upskill the workforce
GenAI use will become so pervasive that employees in every area and at every level will need to be familiar with the technology. Boards should ensure that the organisation is investing in the skills and capabilities required for the workforce to be able to utilise GenAI to its best effect, thereby maximising the value it can bring to the organisation.
Failure to do so could lead to damaging pockets of resistance to the introduction of the technology as well as to the organisation missing out on valuable opportunities.
Maximise return on investment
AI and GenAI undoubtedly present a vast range of opportunities for organisations. The technology can speed up new product development, improve customer service, enhance operational efficiency, and reduce costs. However, the current enthusiasm for all things AI may lead to its deployment in areas which are not justified by a clear return on investment.
Boards should hold management accountable for making a clear business case for AI use before any expenditure is incurred.
The best way to start is with low-risk use cases such as software development. GenAI can assist coding teams with idea generation, coding, and testing. This reduces the time and cost of development, retains human oversight, and delivers a clear return on investment.
In all cases, the utmost care must be taken to ensure the focus on financial return does not stifle innovation. Research and development, by its very nature, involves a certain and often quite high failure rate. That failure rate is part of the price of success and businesses should be willing to invest in and encourage a certain degree of experimentation and this must be factored into any cost benefit analysis exercise.
Five questions for boards to ask
Summary
AI and GenAI will play an increasingly important role in organisations of all sizes across every sector. There is already clear recognition that failure to embrace the technology will confer a market advantage on competitors. In these circumstances, boards must play a proactive leadership role in deciding where and how it can be used to best effect in the organisation, challenge management on the organisation’s ability to exploit the opportunities presented by the technology and put in place the frameworks required to manage risk and ensure regulatory and legal compliance.
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