Do boards truly understand the risks and opportunities AI presents? Ryan McCarthy explains why many are ill-prepared for this game-changing technology
There can be no doubt that the era of artificial intelligence (AI) has arrived. Barely more than a year since ChatGPT landed with a bang, investment has poured into the sector.
Google has launched its Gemini system and Elon Musk’s X has introduced Grok, an AI modelled on the Hitchhiker’s Guide to the Galaxy. Spurred by the proliferation of AI tools in the EU, the European Council and Parliament have reached provisional agreement on the world’s first comprehensive AI law.
Given all this, you might expect that AI must surely be on the agenda at every board meeting. This is not quite the case, however.
We’re not yet seeing AI discussed around boardroom tables in any meaningful way. When it is discussed, it is generally with very little depth.
This needs to change. Every board member must take it upon themselves to understand the issues and implications of AI now and in the future – don’t leave it to someone else.
Threat and opportunity
On the occasions AI does come up at board meetings, the discussion invariably turns to the emerging threat or risks it may pose. What hasn’t been discussed yet are the business opportunities it may also present.
AI tends to be viewed as an external factor that could affect an organisation rather than an operational item to be examined from the inside.
Thematically, we are seeing continued focus on AI as a broad, external and conceptual threat. Board room discussion remains very much at the surface level.
Risk: rules vs principles
Boards have become focused on risk primarily from a corporate governance, rather than a practical, point of view.
The risk section in a typical annual report is getting thicker and thicker – not without reason, but it can contain a lot of ‘cookie-cutter’ risks: cyber-attacks, supply chain challenges and climate change, for example – and now, AI.
There has been a steady drift over time towards rules rather than principles. People ask whether the risk is written down and documented, as opposed to asking, ‘What’s really going to sink the ship?’
You rarely find a strong example of a business identifying a risk that is clearly explained alongside an outline of how it has been contained or overcome.
Advising the experts
So, if boardroom discussions about AI are still only skin-deep, what will move it onto the business agenda?
You have to look at modern governance structure, which involves companies drawing on specialists in areas including audit, risk, nomination/remuneration matters and, more recently, sustainability.
Some companies, particularly in the US, have created the dedicated role of Chief AI Officer. There may be a gap for a technology or ‘emerging tech’ committee at board level.
There are already requirements regarding the correct number of financial experts needed on a board. Should every board now also have technology experts?
Diversity behind the boardroom door
This leads to a broader point: given the close correlation between youth and emerging technology, does the typical top-level boardroom have the right demographic to deal with AI?
We have come a long way in terms of boardroom diversity, but there is another layer to diversity that is exposed here: do we have young people?
Do boards have people from different educational and skill backgrounds, particularly when it comes to technology and innovation? I would say that many don’t.
Outside the boardroom, a company’s executive – including the HR function – should also be getting to grips with AI.
If something like the AI opportunity is not coming up through the organisation to the board level, then you’ve probably got to ask whether you have an executive that is tuned in.
In the same way you need day-to-day skills to fully embrace environmental, social and governance requirements, do you have the right skills for AI?
The workforce question
What I haven’t yet discussed with any client is the opportunity AI could potentially present for the workforce. Part of the reason is that we haven’t yet fully figured out use cases.
It looks as if these use cases will become more apparent in 2024 and beyond. One Dublin hospital has begun using AI to assess radiology scans, for example, while the National Weather Service has an academic collaboration in place to explore the use of AI and data science in weather and climate services.
The medical profession is producing more and more diagnostic information yet there is a worldwide shortage of people to review it. Could AI provide a possible solution?
Companies with large customer service operations have been through the cycle of using onshore customer service teams to moving some elements offshore and then introducing bots or some combination of all three. Could AI provide a better option?
Curiosity is key
I expect AI to feature more prominently in boardroom discussions in the future. The best board members – and by extension, the best boards – have an innate curiosity.
Right now, there are two things in the world we should be curious about now: one is geopolitics, and the other is technology – more specifically, AI. If you sit on a board and you’re not curious about these two things and their potential impact on your business, you may be in trouble.
Ryan McCarthy is Audit Partner and Board Leadership Centre Lead at KPMG
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