As artificial intelligence reshapes business strategies, the conversation around risk management is rapidly evolving. Organizations are now challenged to look beyond traditional safeguards and consider how risk management can drive both protection and opportunity in an AI-driven landscape.
Sumeet Gupta, senior managing director and leader of AI & digital transformation at FTI Consulting, believes that the evolution of AI in business is shifting the focus of governance models. He explained that organisations are no longer just seeking efficiency and productivity gains from AI.
“It is no longer adequate for an organisation’s Board of Directors to focus on traditional risk vectors when it comes to AI governance. They must be equipped to understand, assess and advise on both defensive and offensive plays for creating and protecting shareholder value through AI adoption,” Gupta said.
“Awareness of the risks associated with AI and generative AI (GenAI) isn’t new - in fact it’s one of the biggest concerns of executives as companies consider the implementation of the technology and how to reap gains from it. But missed in the conversation is that these risks are evolving as AI is evolving,” he added.
Gupta points out that to get the most from AI, leadership at the board level must transform how they think about risk. He believes that as organizations implement new AI tools, leaders will need to embrace smart risk-taking alongside risk mitigation, playing both offense and defense.“Said differently, organizations must now balance the need for robust oversight of the associated risks of the new technology with the need to embrace advances in innovation and change," he said. "If they don’t, organizations will fall behind.”
This new landscape is shaped by tactical risks, which are day-to-day threats to business as usual, and opportunity risks, which are more strategic and existential. Tactical risks require constant vigilance to prevent issues such as unauthorized data sharing or model drift.
Opportunity risks, on the other hand, become apparent by asking “what if…” questions, such as what if the organization does not act, invest enough, or have the right talent.
““Think of tactical risks as the day-to-day threats to business as usual," Gupta said. "These risks require hand-to-hand combat to keep out bad actors, to prevent models from drifting from their purpose, from unintentionally sharing internal data with the world, and so on.”
“Opportunity risks are bigger picture or more strategic in nature. What if we don’t act now? What if we don’t invest enough? What if we don’t have the right brain power? These are just some examples, but you can see why these are critical risks that leadership must consider as businesses and markets continue to evolve,” Gupta explained.
He noted that knowing what risks to look for is no longer enough. Leadership must also examine the context and behaviour models behind and around these risks. “Based on our experience, an organization’s board of directors will fit into one of four context and behavior archetypes for leadership when considering AI governance, each with strengths and challenges,” Gupta said.
Gupta noted that boards should ask themselves two questions: which AI governance archetype does leadership currently fall into, and which archetype does leadership aspire to as the organization moves into the future? Weighing the benefits and drawbacks of each archetype is essential to finding the right balance between strategic risk appetite and governance strategy.
“Boards need to use tactical and opportunity risk considerations and their chosen archetype to set a tone from the top for AI adoption. Only with these established can decisions be made to enable risk to be used to advantage and set the course for the broader use of AI in an organization,” Gupta said.
