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The Hidden Dangers of Unregulated AI: How Governance Protects Your Business
A recent survey by Compliance Week revealed that nearly 70 percent of organizations use AI, but do not have adequate AI governance. This is shocking. But the most alarming part is that these organizations do not perceive that lack of governance as a high risk. This lack of awareness is not just surprising, it could allow real organizational harm since it fosters complacency with insufficient governance measures. In effect, these organizations are adopting a high-risk position without the safeguards to manage those risks and fail to grasp the current and potential threats posed by unregulated AI.
AI has already been linked to significant failures across various industries. Examples include bad actors using deepfake technology compromising cybersecurity by impersonating trusted platforms, biased resume screening in employment decisions, and harmful errors in healthcare applications. Believing that your organization is immune to such risks is not only reckless, but potentially catastrophic.
The Equal Employment Opportunity Commission (EEOC) has already warned employers that they will be held accountable for AI systems used in hiring decisions. Similarly, major insurers such as Humana, Cigna, and UnitedHealthcare are facing class-action lawsuits for allegedly using advanced technology to deny claims, highlighting the legal risks of ungoverned AI.
Governments are increasingly recognizing these risks. Although regulations may not yet be fully established, history shows that delayed regulatory action often catches organizations off guard when they assume no such measures are on the horizon. A recent example is the misuse of off-channel communications by financial institutions, where a lack of self-regulation ultimately led to the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission levying almost $3 billion in penalties on financial institutions.
Moreover, as Kevin Werbach of the Wharton School notes, AI policy under the Trump administration is showing “surprising continuities” with Biden’s approach, suggesting that the current administration will likely continue advancing AI regulation and encouraging self-regulation. Ignoring these signals and failing to prepare for incoming regulations could leave organizations exposed to both operational and legal consequences.
Effective AI governance is not just a regulatory requirement but a critical element in safeguarding organizations against the growing risks posed by unregulated AI systems. In our blog posts Why You Should Care About AI Governance and Why Corporate AI Policies Fail: Neglecting Cross-Functional AI Governance, we outline why organizations must prioritize AI governance and the pitfalls of failing to establish a collaborative framework. Additionally, our webinar Navigating the AI Landscape: Governance, Privacy, and Compliance in a Changing Legal Environment delves into the complexities of compliance, privacy, and regulation, offering practical insights to navigate this challenging landscape. Together, these resources provide a comprehensive guide to understanding and implementing effective AI governance.
Guidepost is ready to assist organizations in evaluating their current AI usage, conducting risk assessments, and developing actionable plans that prepare for future regulations. With our expertise, we can help your organization proactively manage AI-related risks, ensuring compliance, reducing vulnerabilities, and fostering responsible innovation. Reach out today to strengthen your organization’s AI governance strategy.
Allison Spagnolo CIPP
Chief Privacy Officer, Senior Managing Director
As Chief Privacy Officer and Senior Managing Director, Allison Spagnolo leads the Artificial Intelligence (AI) practice, ensuring governance and compliance for clients’ AI usage, and compliance engagements across sectors including financial institutions, healthcare, and government contractors. This includes reviewing anti-money laundering (AML) and sanctions (OFAC) issues for global banks and multi-national companies, as well as advising on financial crime compliance issues specific to cryptocurrency exchanges and Fintech companies. She has traveled extensively in Europe and Asia for the purpose of leading and conducting on-site inspections and reviews related to NYDFS and Federal Reserve monitorships, BSA/AML audits and other compliance matters.
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