AI transformation must start at the top, but boards remain divided

Brian Stafford, CEO of governance, risk and compliance specialist Diligent, has been talking to his clients about artificial intelligence (AI) for years. Two years ago, it was still a relatively new concept for boards and the C-suite, he recalled. One year ago, some were still holding back from the technology. Now, he said, it is no longer about the “what”, but the “how”.

Organisations are actively asking how they can use AI to drive innovation, efficiency and effectiveness. According to Stafford, sometimes it is the board that pushes this agenda while other times, it is the CEO.

He gave the example of the CEO of a very large company who tried to get his board to use all of Diligent’s AI capabilities, only to be told they were happy as they were. Ironically, that same CEO was being pushed by the board to deliver corporate AI transformation, even though the board was unwilling to undergo its own. Ultimately, transformation has to start “at the top of the house”, Stafford argued, whether that means the CEO, or the CEO and the board together.

Recent Diligent research into governance leaders in Australia showed that only 43% ranked AI as a strategic priority. Stafford wondered how the remaining 57% could fail to consider it a priority but conceded that “the data is the data”.

“I think it needs to be [a priority], and that’s the way we pushed and steered our road map for our clients,” he said. “I think if you asked CEOs, the number would probably be higher than that.”

Globally, Stafford finds adoption and interest in AI among boards to be nearly as high in the UK, continental Europe and Australia as it is in the US. He attributed this partly to ChatGPT becoming the fastest-growing consumer tool in history, which led to widespread awareness of AI’s potential.

“The organisations that are further ahead are the ones where the CEOs are leading the change,” he said. “I see those CEOs here in Australia, I see them in the US, I see them in the UK, I see them in continental Europe. I have not seen a radical change or difference across geography.”

Meanwhile, corporate obligations continue to grow in areas such as compliance, legal, audit and risk management. As Stafford pointed out, for most companies, it’s not a badge of honour to say their compliance spend is growing faster than their revenue. To become more efficient in meeting those obligations when there is always more work to do, the only answer is to use AI to help drive automation. Many of Diligent’s clients say using the firm’s AI products allows them to become more strategic.

The Diligent report also revealed that 13% of boards have recruited directors with AI expertise. Asked whether this figure is surprisingly high, Stafford pointed out that a number of clients have picked up directors with experience from Silicon Valley and other tech hubs to play an early role in AI transformation.

However, many boards struggle with the trade-off of adding an individual who may have deep AI expertise when most board members traditionally possess more rounded profiles. Stafford noted that there are not many people who combine deep technical expertise in AI with a broader business perspective. Consequently, existing board members need to learn new ways of interacting with their peers when younger people, or those with specific expertise in a new field, join their ranks.

Furthermore, the report found that only 21% of respondents’ organisations mandate AI training for directors. Stafford identified three aspects of AI that directors need to understand, starting with grasping the use and power of AI for transforming internal operations and delivering products and services.

Second, they need to get to grips with AI governance, which involves navigating the complexity of the technology and creating the right structures, guardrails and controls. Finally, directors must consider AI ethics, focusing on the long-term impact and obligations the technology will bring.

Stafford noted that while training sometimes glances over those three areas, it can also end up focusing deeply on just one specific element. Ultimately, board members must ensure they are aware of where and how AI is being applied within their organisation. They need to confirm that an appropriate data framework is in place and that AI projects are operating strictly within it.

Another important job for the board is ensuring the right controls and governance frameworks surround the use of AI, though Stafford acknowledged this remains problematic in the absence of generally agreed or mandated industry standards.