Artificial intelligence (AI), a technology that uses computers and algorithms to augment and simulate human intelligence, is beginning to be utilized across the financial services industry. AI uses large amounts of data and modern statistical methods to enable adaptive pattern recognition, providing “best guess” answers to narrowly defined, well-defined problem sets. However, the use of AI is not without pitfalls; pitfalls exist, especially if due care and consideration is not exercised appropriately during implementation and use.
AI is being introduced at a time of great change within the industry, with regulations and legislation trying to catch up. We recently partnered with colleagues from Oliver Wyman, Hermes Investment Management and leading law firm Bryan Cave Leighton Paisner LLP to publish a joint paper exploring the use of AI as a tool in the financial services industry. The paper examines the pros and cons of AI applications in three areas – asset management, banking and insurance – as well as cybersecurity issues.
This paper raises several important questions that boards need to consider:
- What is the company's AI footprint?
- Does your board of directors oversee your company's use of AI?
- What expertise does the board need to oversee the use of AI? Does such expertise exist in-house?
- Have AI governance principles been established? If not, how are they designed? If so, how are they evaluated and implemented?
What is clear is that the adoption of AI in the financial services sector will require strong and effective governance at board level.
