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June 20, 2023

Recent Study Highlights Rising Dangers of AI and the Pressing Need for Ethical AI; Majority of Businesses Battle to Keep Up

BOSTON, June 20, 2023 — The artificial intelligence (AI) landscape has changed dramatically over the past year with the swift adoption of generative AI (GenAI), making it more difficult for organizations to be responsible with the technology and putting pressure on Responsible AI (RAI) programs to keep up with continuous advances. While more than half (53%) of organizations rely exclusively on third-party AI tools, having no internally designed or developed AI of their own, 55% of all AI-related failures stem from third-party AI tools, according to new research by MIT Sloan Management Review (MIT SMR) and Boston Consulting Group (BCG).

The report, titled “Building Robust RAI Programs as Third-Party AI Tools Proliferate,” is based on a global survey of 1,240 respondents, representing organizations reporting at least $100 million in annual revenues, across 59 industries and 87 countries.

“The AI landscape, both from a technological and regulatory perspective, has changed so dramatically since we published our report last year,” says Elizabeth M. Renieris, MIT SMR guest editor and coauthor of the report. “In fact, with the sudden and rapid adoption of generative AI tools, AI has become dinner table conversation. And yet, many of the fundamentals remain the same. This year, our research reaffirms the urgent need for organizations to be responsible by investing in and scaling their RAI programs to address growing uses and risks of AI.”

Both Leaders and Non-Leaders Need to Step Up

RAI Leaders have increased from 16% of our survey sample to 29% year over year.1 Despite this progress, 71% of organizations are Non-Leaders. With significant risks emerging from third-party AI tools, it’s time for most organizations to double down on their RAI efforts.

Widespread Reliance on Third-Party AI

The vast majority (78%) of organizations surveyed are highly reliant on third-party AI, exposing them to a host of risks, including reputational damage, the loss of customer trust, financial loss, regulatory penalties, compliance challenges, and litigation. Still, one fifth of organizations that use third-party AI tools fail to evaluate their risks at all.

Employing a wide variety of approaches and methods to evaluate third-party tools is an effective strategy for mitigating risk. Organizations that employ seven different methods are more than twice as likely to uncover lapses as those that only use three (51% vs. 24%). These approaches include contractual language mandating adherence to RAI principles, vendor pre-certification and audits, internal product-level reviews, and adherence to relevant regulatory requirements and industry standards.

A Rapidly Evolving Regulatory Landscape

The regulatory landscape is evolving almost as rapidly as AI itself, with many new AI-specific regulations taking effect on a rolling basis. About half (51%) the organizations surveyed report being subject to non-AI-specific regulations that nevertheless apply to their use of AI, including a high proportion of organizations in the financial services, insurance, healthcare, and public sectors. Organizations subject to such regulations account for 13% more RAI Leaders than organizations not subject to them. They also report detecting fewer AI failures than do their counterparts that are not subject to the same regulatory pressures (32% vs. 38%).

CEO Engagement Is Key in Affirming an Organization’s Commitment to RAI

CEOs play a key role in both affirming an organization’s commitment to AI and sustaining the necessary investments in it. Organizations with a CEO who takes a hands-on role in RAI efforts (such as by engaging in RAI-related hiring decisions or product-level discussions or setting performance targets tied to RAI) report 58% more business benefits than do organizations with a less hands-on CEO, regardless of their leader status. Furthermore, organizations with a CEO who is directly involved in RAI are more likely to invest in RAI than are organizations with a hands-off CEO (39% vs. 22%).

Five Recommendations for a Dramatically Changing AI Landscape

The report outlines five recommendations for organizations as they navigate the rapid adoption of AI and the inherent risks associated with it:

  • Move quickly to mature RAI programs.
  • Properly evaluate third-party tools.
  • Take action to prepare for emerging regulations.
  • Engage CEOs in RAI efforts to maximize success.
  • Double down and invest in RAI.

“Now is the time for organizations to double down and invest in a robust RAI program,” says Steven Mills, chief AI ethics officer at BCG and coauthor of the report. “While it may feel as though the technology is outpacing your RAI program’s capabilities, the solution is to increase your commitment to RAI, not pull back. Organizations need to put leadership and resources behind their efforts to deliver business value and manage the risks.”

Click here to download the report.

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. BCG’s diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

Source: BCG