When ChatGTP was initially released to the public at the end of 2022, artificial intelligence (AI) further solidified its position on the board’s list of corporate risks and opportunities. Today, generative AI, the version of AI that is capable of generating novel output like text, images, audio, code, video, etc., continues to balance on the edge of opportunity and threat for executives, employees, and boards. While still nascent, the technology has the power to disrupt industries and sectors. The role of company leaders, including the board of directors, is to manage the risks while unlocking its full potential.
What is generative AI?
Generative AI uses deep learning models that are trained on massive sets of data to produce new output. A generative AI model can create almost anything in the digital world that a human can: write a paper, create digital art, write code, compose a song, make a video, etc. However, it does it more efficiently and at a lower cost unlocking immense potential for productivity and growth. According to McKinsey, generative AI is expected to add around $8 trillion in value from improved efficiency as well as specific AI-based applications.
Value vs. Risk
At this point, the technology is deployed primarily in applications like customer service, marketing, sales, software engineering, and product development. Industries that rely heavily on these functions already feel an impact. For tech, life sciences, telecommunication, banking, media & entertainment, and consumer goods companies, getting on the generative AI train or not is bound to have short and long-term effects. For example, the impact of generative AI on the job market causes a lot of unrest, as illustrated by the current writer and actor strikes in Hollywood.
Using generative AI to replace workers or to (heavily) reduce the number of employees needed for the same output is a tempting proposition to boost a corporation’s balance sheet. However, a decision like that should not be taken lightly. The World Economic Forum cautions that substituting junior-level workforce with AI could jeopardize the development of the leaders and managers of tomorrow. Instead, the reskilling of employees to stay competitive will be imperative.
The role of the board
Privacy concerns, security breaches, hidden bias, deepfake, and copyright infringement are just a handful of risks to look out for when incorporating generative AI into product development and business practices. The pros and cons for each use case should be aligned with the company’s objectives and risk tolerance. Risk oversight is a central responsibility of the board.
After big data and traditional AI, generative AI is the next frontier for innovation. When the board makes decisions regarding the company’s investments, risks, innovation strategy, and talent, generative AI is steadily becoming an essential part of the conversation. In order to make an informed assessment of its value and risks, board members need to have a general understanding of the technology and its implications. A board member with the needed in-depth technological expertise and/or educating the directors through workshops and training sessions will allow the board to continue to provide effective oversight as this promising technology develops.
At Corporate Boards USA, our mission is to prepare executives to be highly qualified board candidates. We offer our members educational courses and events, networking opportunities, boardroom news, workshops, and mentorship programs. Learn more about membership. We Make You Board Ready.