AI and board reporting: A new land for compliance and ethics?

The fast rise of artificial intelligence (AI) has accelerated board compliance and ethics reporting to unprecedented levels of importance. Generative AI has become a central focus for the board reporting agenda of chief compliance officers (CCOs)—particularly since the introduction of ChatGPT in November 2022. Board members now recognize the need to assess the ever-evolving AI landscape to fulfill their fiduciary obligations. As companies navigate the complex growth and regulatory landscape, it becomes imperative to establish a mutual understanding with boards of an organizational process required to develop risk frameworks that enable optimal utilization of AI.

The constantly changing risks associated with AI compliance and ethics present a challenge for CCOs, like navigating a new land for compliance and ethics board reporting. Upon closer examination, it becomes clear that existing compliance and ethics reporting tools can be repurposed to initiate this journey.

Simultaneously, the growing focus on compliance and ethics risks across industries and business areas has provided a unique opportunity for compliance and ethics teams to elevate their game. It has highlighted their significant roles in organizations and created momentum toward a critical inflection point for a long-awaited and well-balanced valuation of compliance risk management skills, technological implementation expertise, and organizational knowledge. The mandate for CCOs is now to maximally leverage and build upon the existing compliance and ethics expertise to effectively navigate the layers of AI and establish robust board oversight.

This article aims to delve into the practical aspects of AI compliance and ethics reporting, highlighting CCOs’ challenges and offering recommendations to maximize reporting effectiveness to the board. It focuses on the new aspects of AI compliance and ethics reporting and how they can be addressed by optimizing traditional compliance and ethics risk techniques and tools. However, it is essential to acknowledge that CCOs alone cannot resolve all AI controversies or unknown implications. The multidimensional challenge will require multilateral governmental and business collaboration for years.

The article reviews the top three compliance instruments CCOs can use to initiate systematic reporting on AI to the boards:

  1. Mastering regulatory compliance for AI: The section focuses on the significance of building an agile legislative compliance and ethics baseline for AI and translating it into business controls that aim to optimally leverage the existing compliance and ethics frameworks.

  2. Maximizing compliance and ethics integration in AI: The subsequent section discusses key compliance and ethics domains where substantial overlap with evolving AI compliance and ethics requirements can be observed and how it is crucial to understand risk shifts based on AI triggers across these areas.

  3. Maturing AI roadmap for compliance teams: Lastly, it is fundamental for CCOs to actively participate in the AI discussion by developing an AI strategy for their teams. Within compliance reporting, it is necessary for board members to observe that CCOs are proactively addressing the potential of AI for their teams rather than waiting for external signals to initiate their own AI endeavors.

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