July 19, 2023
July 19, 2023
The early months of 2023 have highlighted the startling advances in the development and use of generative artificial intelligence (AI)—the promises and perils of the technology—and its ability to create new, original content such as text, images, and videos. Generative AI has been a focus of discussion in most every boardroom, as companies and their boards are seeking to understand the opportunities and risks posed by the technology, a challenge given the pace of the technology’s evolution.
While generative AI is still in its infancy, it is gaining rapid momentum and entering the mainstream. With most boards focused on understanding generative AI and its potential benefits and risks for the company, we hear three recurring themes in our conversations with directors:
Board education. Many boards are asking management for a high-level training session (with third-party experts, as necessary) on generative AI and its potential benefits and risks. The potential benefits will obviously vary by industry, but might include impacts to various business processes such as customer service, content creation, product design, development of marketing plans, and the creation of new drugs.
The training session should include an overview of the major risks posed by generative AI. Many of these risks pose additional reputational and legal risks for the company that can undermine stakeholder trust. Examples of these risks include the following:
Generative AI governance structure and policies. With a high-level understanding of the risks posed by generative AI, boards can begin to probe management as to what generative AI governance structure and policies are appropriate for the company. It’s important to develop a governance structure and policies regarding the use of this technology early on, while generative AI is still in its infancy. Among the key questions to ask during that process are the following:
Board and committee oversight of generative AI. For many directors, there is not necessarily one committee that has oversight responsibility for generative AI (only 12 percent of global Fortune 500 companies have a standing technology committee, according to McKinsey & Co.). Given the strategic importance of this new and rapidly advancing technology, oversight should be a responsibility for the full board. In the oversight of generative AI, it’s clear that director education is critical to help ensure that the board, as a whole, is up to speed on the topic. Whether the board has or seeks directors with generative AI expertise or uses outside experts is an issue for each board to consider. Some directors caution against bringing on an expert, but acknowledge that having board members with significant business technology experience is helpful.
John Rodi is leader of the KPMG Board Leadership Center. Cliff Justice is US Leader, Enterprise Innovation, KPMG LLP.
KPMG is an NACD strategic content partner, providing directors with critical and timely information, and perspectives. KPMG is a financial supporter of the NACD.
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