A Corporate Board’s Guide to Generative AI Benefits and Risks

As generative artificial intelligence (AI) advances, corporate boards are increasingly leveraging its capabilities to improve several aspects of their organizations. However, these boards must understand how to use this tool properly in order to use it effectively in their operations. They must also carefully analyze and weigh the risks it presents; otherwise, they may be exposed to various financial, legal and reputational consequences.

This article outlines the benefits and risks of generative AI technology and offers tips on how corporate boards can oversee its use to mitigate risks.

Benefits of Generative AI for Corporate Boards

There are several advantages that generative AI can provide to corporate boards, including:

•  Improved decision-making capabilities—Generative AI can quickly process large amounts of complex data, identifying trends and offering valuable insights to guide strategic decisions. It can also provide analytics to help forecast market conditions and consumer behavior, potentially giving organizations a competitive advantage.
• Operational efficiency—By streamlining repetitive tasks through automation, generative AI can free up human resources for more strategic roles, leading to reduced expenses through increased efficiency.
• Innovation and creativity—The content produced by this technology can be used in several areas of an organization, including marketing, product development and customer engagement. The ideas and prototypes it generates can help a business release innovative products and services.
• Enhanced customer experience—Generative AI can be trained to tailor products and services to individual customer preferences, improving satisfaction and loyalty. Additionally, AI-driven chatbots and virtual assistants can quickly address customer service inquiries and requests.

Risks of Generative AI for Corporate Boards

Although generative AI offers many benefits for corporate boards, it also presents the following risks:

• Ethical and legal concerns—AI models may perpetuate or amplify biases in training datasets, leading to inequitable outcomes. Additionally, generative AI’s content may raise intellectual property issues, such as the use of copyrighted material, difficulties in copyrighting AI’s creations and potential exposure of proprietary information.
• Data privacy and security threats—Generative AI is trained on data input, increasing the potential for breaches and unauthorized access to sensitive information. The way it collects, processes and shares data may also result in improper use of personal information, leading to regulatory fines and penalties.
• Reputational risks—Generative AI can produce misleading or inaccurate content. Additionally, some clients may oppose the use of AI in business operations and be wary of its lack of transparency. Furthermore, generative AI can create deepfake content where images, audio or videos are manipulated into artificial content that appears real. These risks can harm a company’s reputation among stakeholders, clients and the general public. ·         
• Compliance concerns—As this technology evolves, new legislation is being created to regulate its use, and these laws can vary by jurisdiction. This can increase compliance costs as businesses must monitor and adapt to these changes. 

Governance and Oversight of Generative AI 

Corporate boards that utilize generative AI have a duty to ensure its implementation aligns with ethical principles, industry standards and legal requirements. Failure to do so can have significant reputational, legal and financial consequences. To fulfill their duty and help prevent those negative outcomes, boards should consider governance and oversight measures, including: ·         

• Board education—Board members must be knowledgeable about generative AI’s capabilities, benefits and risks to make informed decisions about how to use it appropriately. They should receive regular training and updates on AI advancements and regulatory changes to ensure its optimal use and mitigate associated exposures.   ·         
• Establish AI governance framework—Board members should demonstrate a commitment to managing AI risks and set the tone for the company’s culture. This can be achieved by regularly including AI matters in board agendas and minutes and developing a structure to oversee AI initiatives. Policies and procedures for AI deployment, ethical use, risk management and compliance should also be created, implemented, communicated and routinely updated. ·         
• Risk management strategies—A business should have a robust risk management strategy that addresses AI-related risks. This plan should include regular audits and assessments of AI systems to ensure accuracy, fairness and compliance with ethical principles and legal requirements. Conclusion Corporate boards can use generative AI to their advantage. However, they must be aware of the risks it presents to make informed decisions on how to best utilize it in their business. Being aware of these risks and taking appropriate action to mitigate them can help boards engage with generative AI responsibly and in a manner that benefits their company, clients and stakeholders. For additional risk management resources, contact us today.

Conclusion

Corporate boards can use generative AI to their advantage. However, they must be aware of the risks it presents to make informed decisions on how to best utilize it in their business. Being aware of these risks and taking appropriate action to mitigate them can help boards engage with generative AI responsibly and in a manner that benefits their company, clients and stakeholders.

For additional risk management resources, contact us today.

This article is intended for informational purposes only and is not intended to be exhaustive, nor should any discussion or opinions be construed as professional advice. © 2024 Zywave, Inc. All rights reserved.