Historically, corporate boardrooms have been led by human judgment and intuition. Management teams make the most significant decisions about an organization’s corporate strategy, risk mitigation, and general direction.
However, the rise of AI tools is set to fundamentally reshape how entire industries operate. The AI market reached $196.63 billion in 2023 and is projected to grow at an annual rate of 36.6% from 2024 to 2030. Also, a notable 97% of business owners believe emerging technology will greatly improve their business and operating models.
In this article, we delve into the benefits of artificial algorithms. Additionally, we explore how trustworthy AI systems can be seamlessly integrated into the boardroom for enhanced enterprise risk management.
AI and the role of the board of directors
Trustworthy and responsible development of machine learning has created new strategic opportunities for the business, and the boardroom is no exception. It’s no longer a question of if AI will impact corporate governance, but how.
This isn’t about replacing human intelligence, it’s here to augment it.
Machine learning frees up directors’ time to concentrate on higher-level strategic thinking and problem-solving, improving board effectiveness.
- Useful reading: how to measure board effectiveness?
Practical applications of AI in the boardroom
Nowadays, the practical uses of AI in business models are nearly unlimited. Machine learning tools have great potential for predicting future trends, evaluating potential risks, and exploring different strategic options. Other than that, AI may find its place in ensuring compliance and ethical governance.
Let’s explore how artificial intelligence can disrupt entire industries.
Case study № 1: Netflix
The use of AI-powered predictive analytics helps to analyze large volumes of data to predict market changes, customer behavior, and potential challenges.
For instance, Netflix employs AI to determine audience preferences, helping to manage content production and acquisition. As a result, Netflix can easily anticipate and adapt to market shifts, gaining a significant competitive edge over its rivals.
Case study № 2: JPMorgan
AI tools can also assist in identifying potential risks by analyzing past data and current market conditions.
JPMorgan Chase is a prime example of responsible AI usage. Specifically, the company is hiring a large number of AI experts to help it tackle a number of challenges, including analyzing massive amounts of transaction data to detect potentially suspicious activity. Thus, AI helps protect the bank and its customers from financial loss. Additionally, the bank evaluates credit risks for more precise lending decisions.
Case study № 3: IBM Watson
One important application of AI is scenario modeling, which allows the technology committee to explore different paths by simulating various future possibilities. AI models analyze the potential results of decisions, helping boards choose the best option, or even create new business models.
For example, IBM Watson’s AI-powered IBM Research Scenario Planning Advisor (SPA) generates potential future outcomes based on current trends and events using natural language processing (NLP).
Case study № 4: PwC
Compliance rules are becoming increasingly complex, making it difficult to effectively oversee changes. Fortunately, AI can automatically check for new rules, ensuring that a company operates ethically and legally.
Specifically, PwC developed its AI compliance tool to stay on top of new regulatory developments.
It analyzes large volumes of legal documents, identifies compliance policies, evaluating the company’s adherence to them. As a result, this saves significant time and helps avoid costly errors.
Using AI for automation
In discussing the process of a board meeting itself, automation can save time and make it more efficient.
For instance, with equipment such as TVs, projectors, video walls, and cinemas, etc., automation tools manage their functions with the press of a button AI ensures that this equipment is connected to a streamlined network versus a bunch of individual pieces of clunky equipment.. Instead of fumbling around with equipment and wasting fellow board members’ valuable time during a presentation, these technologies ensure they operate efficiently and time-effectively.
You can even automate the boardroom climate to ensure optimal comfort for members, so they remain focused during executive session board meetings.
- Useful reading: how to run a board meeting?
AI for augmentation
Many workplaces have been utilizing AI to enhance an array of industrial processes and operations — such as workplace efficiency and customer experiences. This idea is known as augmentation.
Though this blog isn’t about the general workplace — so, how can intricate augmentation tools be leveraged in the boardroom?
For context, according to a 2015 study, only 16% of board directors fully grasp the magnitude of change occurring in their given industries. These directors are also having a hard time coming to grips with just how much technological advancements would play a hand in the future of both their companies and industries.
In 2019, the pace of business is lightning-quick, while operations are far too complicated for boards to reach informed decisions in the absence of machine learning. One aspect of boardroom decisions that the use of augmented technology can aid is strategic decision-making (capital allocation patterns).
Some tools can earmark contrasts with a company’s marketing spend compared to their competitors, as an example. From there, the board can embark on an initiative to find new target demographics and find unique spaces in which they can advertise. With the requisite deep-dive information provided by these machine learning technologies, the board can assess value creation and what kind of budget will generate an optimal return.
Also, boards can implement AI in a way that bolsters operational decision-making. Various technologies are intuitive enough to assess internal communication and generate a hypothesis on employee morale while predicting potential churn rates.
Challenges and considerations of AI on the board of directors
While AI offers significant benefits to boardroom decision-making, its successful implementation requires careful navigation of challenges and board oversight.
The common challenges in AI governance include:
- Machine learning bias. If the data used to train AI is prejudiced, its decisions may also result in unfair or unequal treatment of stakeholders.
- Transparency and accountability. When overseeing AI, the board’s role includes being responsible for decisions made or influenced by algorithms.
- Managing change. Successful implementation of machine learning technologies often requires considerable changes in decision-making processes and organizational operations. It is important to support to employees and provide extra training.
- Lack of AI understanding. Board members who lack a strong technical background may find it challenging to assess or use AI tools properly.
- Integration with existing processes. New algorithms may not seamlessly integrate into a company’s current workflow, requiring planning and process adjustments.
Future trends of AI-powered board of directors
The potential of AI to transform boardroom practices is enormous. Several emerging trends indicate that AI will open unprecedented opportunities for board governance and revenue in the years ahead.
A Datasite survey of over 2,000 professionals found that around 30% believe that AI and machine learning will significantly influence transformative mergers and acquisitions (M&A) within the next five years. Potentially, it could reshape how boards approach complex strategic decisions.
Yet, the influence of algorithms is not limited to M&A. Namely, the impact of AI-powered business intelligence and analytics will also be noticeable in the healthcare industry’s evolution.
Additionally, industries such as information and communication, manufacturing, and finance stand to benefit significantly from the early adoption of AI, as it may become a key driver of growth and competitiveness. A recent study forecasts that AI adoption could generate $6 trillion for these sectors by 2035.
Undoubtedly, one of the most significant impacts will be seen in the workforce. For boards, this means a shift not only in decision-making but also in talent management and workforce strategy. The statistics demonstrate that AI will trigger the creation of 97 million new roles, changing the work balance between human beings and algorithms.
It’s time to start implementing AI in boardroom governance
AI-powered tools offer many attractive benefits. The most important include improved decisions through data-driven insights, enhanced risk management, and guaranteed compliance in real time.
For boards starting their AI journey, effective oversight is essential when implementing new technologies successfully. Let’s explore the best practices:
- Identify areas where AI might be useful, such as predictive analytics, risk management, or compliance.
- Choose AI solutions that match your organization’s needs and can be scaled as those needs evolve.
- Ensure board members grasp the fundamentals of AI and its applications to use it safely.
- Regularly assess AI tools to make sure they are still useful and ethical.
- Use board portal software for centralized data storage and secure communication.
- Useful reading: what is a board portal?
Board portals can be highly effective in supporting integration. These platforms are equipped with tools aiding corporate governance, meeting preparation, and information storage.
For companies exploring the integration of AI in boardrooms, getting acquainted with solutions like iDeals Board is an excellent starting point. iDeals Board provides a safe, user-friendly, intuitive platform with top-notch capabilities. In particular, the tools and features include:
- A centralized document repository that keeps all board materials in one secure location, making them easily accessible to members anytime.
- Meeting scheduling and management allow for quick scheduling, organizing, and managing board meetings.
- Agenda and board book creation is optimized via features like document attachment, voting, and minutes generation.
- Task management capabilities help to track and assign action items related to board meetings and projects.
- Real-time document editing and commenting enables collaborative work on documents.
