I have written a number of articles about the interaction between artificial intelligence (AI) and governance and risk management. My latest piece highlighted the impact that AI tools can have on a firm’s risk profile (here). I am in the process of gathering my thoughts on how to provide for the ongoing and timely monitoring of AI-based tools, including their integration in business governance and risk management in financial services.
While reading on the subject (and keeping up with the pace of the Oxford FinTech Programme), I came across a succinct and interesting paper from Singapore’s Monetary Authority (here) that articulates how the principles of fairness, ethics, accountability and transparency can - and should - be applied to promote the use of AI in the financial sector.
The paper highlights four useful points for senior management and Boards considering the strategic use of AI-based tools.
1. It is important to invest time and effort understanding and monitoring the decision making of AI based tools – i.e. do not regard AI-based tools as black boxes.
2. AI decisions are subject to the same ethical standards that apply to decisions made by staff – i.e. if AI-based tools purport to make decisions as humans would, but without their ‘feelings’, they should be scrutinised like humans.
3. Governance has an important internal element not just an external one - i.e. firms should not rely on regulatory initiatives to support them delivering appropriate outcomes.
4. The use of AI-based tools is transparent to consumers in terms of their use and outcomes – i.e. while there are limits to explanations that can be provided this cannot be dismissed altogether.
The paper also includes a number of practical illustrations that highlight the principles identified.
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