AI and generative AI offer new strategic opportunities — and risks, both operational and reputational, that need to be managed. The board has a role to play in overseeing trusted AI systems to help safeguard the company while delivering value.
A watershed moment
Artificial intelligence is back in the headlines. The technology has been around in various forms for decades, and in routine use in companies for nearly as long, but the convergence of cloud computing, high-speed computer processing and ubiquitous data have all dramatically increased accessibility and use. “Generative AI,” including ChatGPT, Bard and DALL-E 2, has come to dominate conversations everywhere from social media to strategic discussions. C-suite executives and directors are looking to catch up on developments in AI, with companies discovering new, advanced applications nearly every day.
49% of CEOs think that technology disruptors, such as AI, will impact profitability to a large extent over the next 10 years.
Key areas boards should address for AI and generative AI
Most companies will likely continue to expand their use of AI and explore the possibilities of generative AI. The board’s role is to oversee management and focus on how these technologies may impact the corporate strategy and how risks — especially those that are mission-critical or threaten reputational risk — are managed across the company while not limiting innovation. To provide appropriate guidance to your companies, boards need to understand this technology’s potential — and its limitations. Here are four key areas that boards should address for AI and Generative AI:
- Develop a board approach
- Understand the strategic opportunities
- Oversee risks and controls for trusted AI
- Keep up with emerging regulations
Get educated on AI and generative AI
The first place to start is for boards to increase directors’ knowledge of AI and generative AI, tapping both management and external resources to stay apprised of the technologies’ growing capabilities, keep up with new use cases and how business models are changing, and risks and responsible use.
When addressing AI and generative AI, directors need to think about the technology and its use from a business perspective. As with the many other areas that the board oversees, its role is to ask management good questions — some examples to start with are shared in this report — and challenge management when appropriate. As the board addresses AI and generative AI, the board can consider whether additional skill sets are needed, or whether to rely on management’s skills or those of third parties.
Review the costs and benefits of this technology
Boards should discuss with management the overall benefits and costs to the company. For benefits, it’s a matter of reimagining how you get things done — how employees work, how customers engage, and what you sell and how you compete. Costs for employees across the company to be trained and upskilled on AI and generative AI use may be needed, as management looks to build a culture that encourages employees to learn new skills — and one that incentivizes speed and innovation to capture new opportunities.
Have a governance model with accountability
A governance model that drives accountability is critical, beginning with understanding who owns the responsibility for AI governance within the company. An effective governance model enables an organization to evaluate the unique benefit and risk trade-offs associated with its particular technology and individual use cases.
Oversee a plan for AI oversight to measure success
As companies decide their path forward with AI and the business use cases that management is prioritizing, there may be a large digital transformation across the company and a substantial investment required. When a big investment is being made to transform the company, the board will want to understand the digital transformation strategy and plan around AI, and how it aligns with the business strategy.
Consider communications with stakeholders
The board should also examine how the company communicates its AI story both internally and externally to stakeholders, focusing on the strategic changes management is making to remain relevant and competitive in today’s rapidly changing business environment and the safeguards employed to protect staff, customers, the organization and other stakeholders.
AI could contribute up to $15.7 trillion to the global economy by 2030. Who will get the biggest share of this prize? Those who take the lead now.
Conclusion
AI and generative AI will continue to provide companies with opportunities for greater applications and innovation, and with risk concerns, cost benefit considerations, and regulatory requirements to consider. As companies determine how to use this technology responsibly, and build trust in their applications, oversight and guidance will be an important role for boards to play as ever.
