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News round-up: September 2019

Boards urged to ask more ethical questions about AI

Boards need to do more to understand the ethical implications of using artificial intelligence (AI) to support the business, especially around decision-making, according to the Institute of Business Ethics (IBE). Its new board briefing  offers practical advice on how to address the ethical challenges of AI and looks at the expertise that is required in the boardroom.

The guidance, called “Corporate ethics in a digital age”, presents nine challenges relating to the use of AI and suggests questions to help executives address key challenges, such as how AI systems can avoid bias, deal with cyber attacks, keep data secure, treat customers, employees and contractors fairly, and ensure accountability.

The report suggests that directors need to be able to challenge assumptions about the technology, ask the right questions, insist on answers they can understand and set limits on how AI and machine learning is used.

“Boards need to understand how AI has affected decision-making and be clear about where the machine’s capability to make decisions ends,” it says.

The report uses case studies to highlight the real-world dilemmas that boards are facing and suggests four ethical principles for using algorithms that they should consider.  These are:

1. Reliability – do we keep our promises?

2. Honesty – do we deceive and lie to people?

3. Transparency – do we operate in secret and can we explain our decisions?

4. Respect – do we trample over the interests of others to get what we want?

“Lapses cannot just be blamed on AI,” the guidance says. “Someone has to be accountable, and in the corporate world accountability rests with the board. This is why it is imperative that directors know how to ask the right questions.”

Accenture highlights four ways to benefit from business disruption

Nearly three-quarters (72 per cent) of industry sectors have experienced an increase in disruption over the past eight years, according to a new report from consultancy Accenture. 

The report, called “Breaking through disruption: embrace the power of the wise pivot”, identifies four key actions that companies should take to be ready to innovate differently and excel during disruptive times.

First, it advises companies to “create their next cutting edge” by embracing new technologies to develop potentially disruptive ideas, inside and outside their current industry.

Second, they should “fund their future bets” by bolstering and allocating their innovation investments so that they can test and turn new ideas into commercial realities faster.

Third, businesses should “find partners to scale with” who can provide access to technologies and specialised talent.

Fourth, companies should consider establishing a specialised entity internally, such as an innovation lab or a digital factory, in order to bring meaningful innovation into their established business.

BSI publishes supply chain risk analysis

UK standard setter BSI has identified five major themes that it believes are most likely to put supply chains at risk throughout the rest of the year. The five themes are: cyber security threats; political-economic uncertainty caused by Brexit and the US-China trade dispute; the revision of the US minimum anti-terrorism security criteria for cross-border customs; supply chain growth in Africa, which increases exposure to a variety of risks; and ongoing mass migration, which poses both security and corporate social responsibility risks.

It found that labour strikes were the most frequent cause of disrupted manufacturing operations in 2018.

Equipment breakdown blamed as leading cause of business disruption

Equipment breakdown now rivals fire loss in both frequency and severity of claims, according to an analysis of large risk losses (those over US$3m) reported in 2018 to commercial property insurer FM Global.

Of the company’s 232 large risk losses last year, 65 were the result of equipment breakdown – many of which were preventable.  FM Global found that 62 per cent of equipment breakdown losses were caused by lack of maintenance, and these accounted for three-quarters of all equipment loss claims paid. A quarter occurred after repairs were made or during start up.

Nearly half of all equipment breakdown losses had a significant human element impact or influence – operator training was a factor in 43.

Risk readiness at lowest level for 12 years

Organisations feel that they are less prepared than they have ever been to manage risk, according to the “Global risk management survey 2019”, by risk specialist Aon. It  found that key industry concerns include a slowing economy, apprehension about global trade conditions and the resulting damage to reputation and brand.

Aon’s researchers found that, in a weakening economic environment, companies felt that they are more sensitive to volatility, particularly from emerging risks such as cyber attacks, business interruption from non-physical threats and shortages of skilled workers. These risks are less well understood than other types as companies have less experience managing them and there is less data available to help them. As a result, Aon said that risk readiness has declined to its lowest level in 12 years.

Only 24 per cent of respondents said they quantify their top ten risks and just 20 per cent use risk modelling. In addition, ten per cent admitted they have no formalised processes in place to identify risks.

Charities internal audit network celebrates 25th anniversary

Internal auditors working in the charity sector play an essential role in an increasingly tough environment. So it’s good news that  The Charities Internal Audit Network (CIAN) recently celebrated its 25th anniversary with a full-day event and important developments in the support it offers – in particular a newly designed and more functional website.

“Internal audit in the charity sector is under-resourced,” says Vanessa Clark, chair of the network. “Some of our members have no budget for continuing professional education (CPE) and many don’t even have a full-time auditor, so what we provide is hugely valuable.”

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This article was first published in September 2019.