The recent annual survey by Ernst & Young LLP and the Institute of International Finance reveals that the financial services industry is increasingly integrating artificial intelligence (AI) and machine learning (ML), with 84% of institutions using AI models widely. Additionally, 86% anticipate that generative AI (GenAI) will boost the number of models in their inventory. Recognizing the governance burden, many institutions have assigned or are planning to assign a C-suite executive to oversee AI/ML ethics and governance.
Bank boards hold a unique position in supporting their organizations as they implement new models. Several key areas have been identified in which boards can aid their organizations, speed up the adoption of AI, and prepare themselves for effective oversight. Those three key actions for bank boards to consider are:
- Supporting a Strong Technology Foundation
- Facilitating AI Integration
- Embedding Responsible AI Practices
Directors need to restructure their board for effective AI oversight by ensuring that the boardroom possesses the necessary skills. It has been observed that successful bank boards continually update their skills, knowledge, and composition to provide clear oversight and strategic guidance, particularly in the swiftly evolving technological landscape. There is an increasing demand for technology and operations expertise to address the complexities and opportunities enabled by emerging technologies.
In addition, Directors should also determine where the oversight of AI should reside within the organization. Discussions about AI should go beyond just risk and compliance policies. It’s essential to consider whether a designated technology committee is necessary, based on factors such as the size of the board, the availability of resources, potential overlaps with existing responsibilities, and the need to review and update board charters if new committees or responsibilities are added.
Click here to read the full article in BankDirector.com by Bill Hobbs, Managing Director and Bart Edgerton, EY Americas Center for Board Matters, Corporate Governance Research Leader.