The Challenges of Artificial Intelligence Adoption and Regulatory Compliance

August 16, 2023

Be it our lives or our work – the growing influence of artificial intelligence (AI) cannot be ignored. Today, AI is deep-rooted in almost every area of business. Many C-level execs attest to deploying this technology in the core parts of their companies. 

While AI brings many fruitful gifts to businesses across the world, it also increases exposure to corporate compliance risks and unlocks countless new legal and ethical concerns. To avoid these challenges, companies must make ethical considerations and work towards regulating their automated worlds. 

Risks and Benefits of AI Adoption 

If left unchecked, AI can potentially damage organizations and harm their people. It can increase cybersecurity threats, trigger biases against people from certain demographic groups, and even wreak havoc on the global financial system. 

In fact, artificial intelligence has already attracted legal and regulatory attention for issues including cybersecurity threats, employment discrimination, and intellectual property violations. Experts observe there are many other threats that organizations are yet to realize. 

But despite all the risks it brings, many experts believe that a well-designed and well-governed AI system can benefit organizations and societies. 

What Businesses Need to Know 

AI continues to evolve at lightning speed as we speak. This growth signals the accelerated arrival of new laws and regular requirements across all jurisdictions over the next couple of years. 

This level of regulatory activity is likely to increase the complexity of how we run our organizations and possibly lead to higher compliance costs. The new AI regulations will demand new expertise and advanced processes to ensure workplaces remain compliant throughout their engagements with customers, clients, and employees. Leaders will have to be aware not only of new AI specific laws, but how old laws would impact new algorithms.

What Regulatory Risks Must Businesses Prepare For?

Here are a few of the many regulatory compliance related risks AI can bring:

Risks of Bias and Discrimination 

Let’s not forget that AI is created by humans. That means it is just as susceptible to prejudices and biases as we are. If individuals with unconscious biases feed AI, the outcome would be prejudiced programming. 

For instance, when Amazon deployed its AI framework to screen job candidates, the algorithm ended up favoring male resumes. The reason? The algorithm was designed based on the company’s hiring patterns during the previous decade – a period when a majority of the tech world was occupied by male individuals. 

Biased (unconscious or not) and discriminatory technology can severely damage a company’s compliance footing and bottom line. This is why it’s critical to ensure every AI system operates ethically and fairly before deploying it. 

Data Privacy Risks 

Data is food that keeps AI running. This means AI technology demands large volumes of data to bring accurate results. But the process of data collection and use comes with several security and privacy concerns. Organizations must understand the importance of complying with data privacy requirements each time they accumulate and feed customer and employee data into their AI systems. 

When it comes to data security, companies must take steps to safeguard the data they use. Businesses must also invest in valuable training programs surrounding security awareness to eliminate breaches that may compromise sensitive customer, employee, or company data. 

Security Concerns 

While AI skyrockets the efficiency of your processes, it also opens up new opportunities for criminal activities and misappropriation. As the AI revolution continues to get stronger, companies must find a way to ensure AI is developed and used in a way that aligns with their internal policies and company values. This can be achieved through meaningful security training and constant monitoring of all existing systems.  

Antitrust Capabilities 

AI comes with a massive potential for unethical use. This can lead large businesses to make decisions that can dominate the market and erase the competition. Such potential comes with an equally massive antitrust liability. 

For instance, if an organization decides to exploit AI for collaborating on pricing decisions, the results would be a huge reduction in competition with countless small companies running out of business. 

The risks of AI have made regulators increasingly aware of different marketplace dangers. To avoid any possibility of noncompliance, it is critical for organizations to pay special attention to their AI-related actions including, the violation of antitrust laws. The goal of using AI must be to improve an organization’s efficiency, not justify anti-competition laws. 

How Can Businesses Adapt to Emerging Corporate Compliance?

With AI becoming deeply rooted in company processes, new laws and regulations are on the horizon. On the federal level, lawmakers are constantly navigating AI’s potential uses and dangers. 

Very soon, this emphasis will create newer, more complex compliance requirements across both public and private sectors. A great start for companies to stay in line with the evolving compliance landscape is to ask, “How are we protecting our organization against potential risks that could come with rapid AI adoption?”

To follow the upcoming AI regulations, companies will need to deploy new strategies, processes, and tools such as:

  • Documentation and data protocols 
  • System audits 
  • Diversity and awareness training 
  • AI monitoring
  • Security awareness training 

Several companies are already in the process of testing new AI algorithms to determine whether the output is in line with their core values and leaves no room for regulatory concerns. 

Companies like Microsoft, Google, and BMW have been developing formal AI policies to ensure they remain committed to privacy, safety, and diversity. Some companies have even hired chief ethics officers to manage the enforcement of their policies.

A Final Word

The potential of AI cuts both ways. It can help businesses skyrocket their efficiency or land in a tangle of compliance pitfalls. 

The AI wave has already arrived. Even if your business doesn’t directly engage with the technology’s challenges, it must still brace itself for risks that are already in sight. 

A great start to adapting to these changes would be to implement training from established partners. This can help your management and employees recognize bias, data security issues, and other potential threats of AI use. With a professional compliance partner, your business can glean the benefits of the ongoing AI revolution while preventing any compliance and ethical pitfalls associated with it.