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Navigating the risks and challenges of AI (quickly): Create an AI governance program

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Pressure for companies to use generative AI (GenAI)-assisted applications to gain a competitive advantage is steadily rising, and in 2024, CEOs will push their IT, legal, compliance, privacy, and KM teams to deploy AI applications. Yet while AI promises tremendous innovation and productivity gains, new compliance rules, along with concerns about copyright, ethical use, and correctness, are creating a challenging regulatory and risk environment.

This business pressure to quickly deploy AI versus taking time to address compliance and risk challenges is creating a tug-of-war within organizations. Smart companies today are developing AI governance programs that avoid this dilemma. AI governance programs ensure compliant, defensible, and ethical use of this AI without slowing down, or, in some cases, speeding up, deployment.

Why are companies rushing to deploy AI-assisted applications?

The advent of GenAI offers the promise of tremendous leaps in productivity, new revenue, cost savings, and increased innovation. After decades of technological stagnation, AI has been elevated from the fringes to the mainstream. AI-assisted applications are being launched in legal, finance, marketing, product design, and engineering departments and will eventually be in nearly every single area of the organization. (Full disclosure: Contoural is launching an AI-based records management initiative.) Driving this rapid adoption is the promise of a 10x productivity increase. Employees using AI-assisted applications have the potential to become 10x more productive than those who are not using them. The potential productivity impact of AI is real.

This supercharged productivity boost has the potential to bring companies real competitive advantages in their markets over their competitors, reshaping how they operate. Much as the advent of the internet in the late ’90s changed how many businesses operate, GenAI promises to be equally impactful.

Investors understand the tremendous competitive advantages AI offers and are rewarding companies that have announced they are using AI. According to researchers Storible and WallStreetZen, companies that mentioned AI saw an average stock price increase of 4.6%—almost double that of companies that did not. The potential to bump up a company’s stock price is motivating CEOs to drive adoption in their organizations.

See Figure 1: AI faces significant regulatory, legal, and other risks and challenges.

The risks and challenges of using AI

AI’s tremendous benefits are being met with an almost equal concern on compliance and risk.

GenAI’s explosive adoption has been met with a quick response from regulators, creating a rushed and messy regulatory environment. Every week, governments across the world are proposing restrictions on how and where this modern technology can be used. Wanting to become the global standard, in March, European regulators passed the AI Act, restricting and regulating how AI can be used, as well as providing over-all safeguards, especially around the use of personal information. The Biden administration created a new standard for safety and security, and U.S. states are limiting how companies can use AI to make financial decisions such as loan approvals. Other countries have similar initiatives.

AI raises significant copyright and IP concerns. In January, The New York Times sued both OpenAI and Microsoft, claiming that their GenAI products were based on and violated the Times’ copyrighted information. The courts are only beginning to address some of these challenges. Additionally, companies deploying AI-assisted applications also need to ensure that these systems do not leverage or potentially expose their own proprietary, corporate confidential information, or trade secrets.

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