Use of AI for business governance must improve at the board level
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Loading... - Layla Mido
- 02 Sep 2024
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The rapid integration of Artificial Intelligence (AI) into business operations has raised significant concerns about governance, prompting calls for more proficient management at the board level. Carine Smith Ihenacho, the chief governance and compliance officer of Norway’s $1.7 trillion sovereign wealth fund, Norges Bank Investment Fund, has emphasized the necessity for boards to understand and control the application of AI within their businesses to mitigate associated risks.
The Norges Bank Investment Fund, which holds stakes in nearly 9,000 companies globally, has been a leader in addressing environmental, social, and corporate governance (ESG) issues. In line with this, the fund has provided recommendations to its invested companies on incorporating responsible AI practices to enhance economic outcomes. Despite this guidance, many companies still have significant progress to make in this area.
Smith Ihenacho pointed out that while not every board needs an AI specialist, there is a critical need for collective competence among board members regarding AI's role and risks within their business. She stressed that boards should be able to answer fundamental questions about their AI policies, risk levels, customer interactions, and transparency. This broad understanding is crucial for effective governance.
The fund has been particularly active in engaging with the boards of its largest portfolio companies, especially in sectors like healthcare, where AI's impact on consumers is substantial. It has also focused on the governance structures of Big Tech firms, emphasizing the need for robust policies and board involvement in managing AI-related risks.
The importance of AI governance is underscored by the fund's significant exposure to the tech sector, which now constitutes a quarter of its stock portfolio. Investments in leading tech companies like Microsoft, Apple, Amazon, and Meta Platforms have contributed to substantial growth in the fund's stock portfolio, highlighting the central role of technology and AI in the global economy.
While the fund supports AI innovation for its potential to drive efficiency and productivity, Smith Ihenacho has consistently emphasized the need for responsible AI management. This approach aligns with growing global concerns about the ethical implications and potential dangers of AI, especially as it becomes more prevalent across various sectors.
The fund's proactive stance on AI governance could influence corporate governance practices worldwide, encouraging companies to develop comprehensive AI policies and adopt responsible practices. As businesses continue to harness AI's power, the guidance from influential investors like Norges Bank Investment Fund may serve as a critical blueprint for responsible AI implementation and governance.
