AI expands the field of vision for boards, as they guide growth strategies and oversee risk mitigation.

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In brief

• Boards can build confidence in AI by developing guiding principles, ensuring compliance with existing regulations and monitoring emerging regulations.
• They can encourage value creation through AI by incentivising innovation, prioritising data readiness and rethinking business processes and models.
• They can augment human potential in the boardroom by prioritising competency development and boosting boardroom diversity.

This film and article are the first of our (EY) Board Reimagined series, which provides new perspectives on governance to enhance board confidence and organisational resilience.

Artificial intelligence (AI) presents a quandary for organisations — they feel pressure to move quickly to remain competitive, even as they are constrained by risks and capability gaps that hamper quick action.

Indeed, AI’s breakthrough capabilities and promise have fuelled considerable excitement and investment. The EY CEO Imperative Survey finds an astounding 99% of CEOs are investing in Gen AI, driven by the fear of falling behind and 70% of CEOs think they need to act immediately on AI to prevent competitors gaining a strategic edge.

“By late spring of 2023, everybody was talking about ChatGPT. Board members would say, ‘What is our AI strategy?’” says Dr Homaira Akbari, Non-Executive Director at Santander. “Competitors are going to be taking advantage of this technology and if we are not, what do we do about it?”

Despite this urgency, organisations face significant challenges in achieving their ambitions. The CEO Imperative survey found 68% of organisations agree that the uncertainty around GenAI makes it challenging to move quickly. Meanwhile, the EY AI Anxiety in Business survey (via EY US) finds 77% of respondents are concerned about AI’s legal risks, and 75% about its cybersecurity risks. Another EY survey (via EY US) finds 61% of organisations facing difficulties in sourcing the top tech talent needed for implementation.

Boards sit at the crux of this tension, thanks to their unique dual role.

“While on one hand boards have to look after the legalities and the regulatory compliance aspects, they also have responsibility to look at strategy and technology shifts and innovation,” says Alan Triggs, Chief Digital Officer at Nokia. “Sometimes, [these responsibilities] conflict with each other in terms of priorities.”

How should boards navigate this quandary as they advise organisations on both growth strategies and risk management related to AI? To explore this tension, the EY Center for Board Matters convened a series of conversations between a board member and a senior executive in London, Sydney, and San Diego. The leaders discussed AI’s implications for boards across three areas: building confidence, creating value, and augmenting human potential.

1. Building Confidence in AI

Building confidence in AI is critical for boosting adoption and mitigating risk. This includes both compliance with existing regulations such as the EU AI Act, as well as proactively developing an effective organisational governance model.

Boards can set direction with a principles-based approach. Dave Wright, Chief Innovation Officer at ServiceNow, discussed how their board developed guidelines for the organization, including “being transparent in AI” and “[ensuring] AI was always in the service of people.”

Film participants discussed the need to find a balance in the tension between ethics, innovation and regulation, recognising that too much regulation may stifle innovation.

2. Creating value with AI

Creating value with AI requires a culture of innovation and learning. Participants discussed the importance of empowering innovators to fail fast, and employees to use AI safely with guardrails.

Data and behavior are key AI value drivers. May Lam, Chief Information Officer at Australian Payment Plus, says “Data is still the goldmine… and behavior of the data… is now the new oil.” Participants discussed the importance of data readiness, including ensuring cleanliness and data governance. Data cleanliness helps ensure that models are trained on accurate data, which improves the accuracy and fidelity of outputs. Data governance helps mitigate risks such as bias, privacy violations and regulatory non-compliance.

But organisations also face increasing scrutiny around the cost and ROI of AI investments — particularly amid high implementation costs and an inflationary climate — making it critical to identify the use cases that will drive the biggest value pools and outcomes. From use cases, organisations can move to trials to demonstrate proof-of-concept, and then into production and scaling up.

AI has the potential to fundamentally reshape organisational operating and business models. Participants discussed using AI to drive organisational transformation, which then leads to business transformation. While most will start with use cases that make existing business processes more efficient and productive, the bigger opportunity is to rethink business processes, functions and models from the ground up, and optimise them in an AI-first way.

Ultimately, AI will create value by reshaping talent and work across the organisation. Homaira Akbari and David Wright pointed out that 60% of today’s job titles did not exist in 1940, and that AI will similarly reshape work and redistribute the workforce.

3. Augmenting Human Potential in the Boardroom

While AI will reshape work across the enterprise, its potential to augment human potential within the boardroom is less explored — and this was a key focus of the participants.

Firstly, it is critical for boards to develop expertise in AI to effectively oversee and use it. Caroline Silver, Non-Executive Director at Tesco, NFTS, and Intercontinental Exchange, emphasises the value of off-sites that allow boards to take some time away from their routines and “deep dive into [a topic] to get us up the [learning] curve.”

David Whiteing, Non-Executive Director at Macquarie Bank, highlights the importance of a growth mindset. “If you start from a perspective of ‘I don’t know,’ you’re going to spend more time on your own personal growth, education and development.”

As overseeing AI requires diverse skill sets and involves diverse value drivers, boards will need to assess their composition. Organisations need technologists on their boards, regardless of whether they are in the tech sector or not. Advisory councils can also attract the perspectives of younger tech-savvy professionals, who may be less interested in becoming full time board members.

Diverse thinking does not have to come solely from human board members.

“At some point, boards will actually use AI to help them make decisions [and] analyse risk,” says Dave Wright. “AI could become part of the board decision-making process.”

With boardroom diversity, as with much else, AI could provide part of the answer even as it creates the imperative for change.

Actions for Boards

• Focus on how AI can fundamentally disrupt your business model — and imagine how you would design your business model from the ground-up, in an AI-first way.
• Ensure the board is equipped to provide guidance on principles of responsible AI use, such as fairness, accuracy, reliability, explainability and transparency. Talk to management about bringing in AI experts and set aside time for organisational off-sites.
• Enable management to engage the board on aligning the opportunities for AI across the organisation. Ensure the organisational culture supports the integration of AI and recognise if employees across the organisation are as AI-ready as its data.

Summary

AI will be a critical growth driver in the years ahead, as it reshapes talent within organisations and disrupts business and operating models. Achieving this potential will require organisations to mitigate AI’s risks and build confidence in its use. To guide organisations through these transitions, boards need to focus on expanding their competencies and boosting diversity.

The article was first published by EY.

Photo by New Material on Unsplash.