AI technologies are redefining business strategies, employee roles, and workflows as agile companies leverage AI technologies to empower teams and drive innovation.
Two common types of AI are: machine learning (ML), feeding large amounts of data into algorithms that analyze and learn from it to predict future outcomes such as economic forecasts and credit risks; and Generative AI (GenAI) which goes beyond analyzing data to create new content that mimics human creations, such as engaging chatbot customer service interactions and the possibility of deepfake audio and video that look “real”.
That’s why AI impact on products, services, and financial performance must be balanced with proactive risk management, and appropriate processes and controls for oversight of both AI and human-directed activities.
Underscoring AI’s impact on financial performance, PricewaterhouseCoopers’ Annual CEO Survey, released in January 2025, reported that one-third of CEOs believe AI has increased revenue and profitability over the past year, and one- half expect it to drive increases in profits in the year ahead. In a separate survey of corporate directors, 57 percent said the full board has primary oversight of AI and other emerging technologies, while 17 percent assigned that responsibility to the Audit Committee.
Clearly, the expectation is that the board at large, and Audit Committee members specifically, are responsible for oversight of management’s application of AI technologies, including:
- Monitoring the use of AI in financial reporting beyond simply preparing the report to include processes and controls to document, gather, and aggregate data
- Overseeing the impact of AI on data security and privacy
- Guiding the development of operational and strategic plans to mitigate risks while exploring opportunities arising from AI technologies
Audit Committee evaluations should determine how AI could heighten risk if it fails, is intentionally or unintentionally misused, or is over relied upon, including potential impacts on financial reporting, compliance failures, and legal issues.
This information helps Audit Committee members understand how their bank is using AI so they can guide discussions and challenge leadership when necessary. To drive this oversight, Audit Committee members should ask:
- How are we using AI to evaluate and take advantage of opportunities to grow and remain competitive in the markets we serve?
- What internal processes and controls are in place to regulate the use of AI, including formal procedures that ensure on-going human oversight?
- How are we driving the responsible use of AI through strong governance and risk management?
- Do our AI models use confidential or sensitive information and how is that data protected?
- Prior to their use are AI models tested and validated for security, accuracy, and data bias?
- How are employees trained on the appropriate use of AI
AI technologies can be a powerful tool to transform your financial institution and deliver positive outcomes. Let our experts help your board and Audit Committee provide effective, comprehensive oversight. Contact Jessica Dore, CISA, at 989.797.8391 or [email protected].