AI Risks in Business: Companies Sound the Alarm in Disclosures

Corporate giants are increasingly worried about the risks tied to artificial intelligence. A new report reveals a significant jump in concerns over cybersecurity and reputational damage as AI becomes more embedded in business operations.

AI Risk Disclosure Soars

The Conference Board’s report highlights that over 70% of S&P 500 firms now flag AI as a material risk. This is a steep climb from just 12% in 2023. This surge reflects how quickly enterprises have moved from experimenting with AI to implementing it across their businesses.

AI is no longer just a test case. It's now integrated into crucial functions like product design, logistics, and customer service.

Reputation and Security Concerns

Reputational risk leads the pack of concerns, cited by 38% of firms. This worry stems from the potential for service failures or privacy breaches harming brand trust. Cybersecurity risk is also a major issue, flagged by 20% of companies.

The increased attack surface that comes with AI and the risk of third-party applications are driving these security fears. Legal and regulatory risks are adding another layer of complexity.

Governance Lags Behind

Governments are rushing to establish rules for AI. They want to protect the public while still allowing companies to innovate. However, corporate governance isn't keeping pace with the rapid deployment of AI.

PwC’s recent survey shows that only 35% of corporate boards have formally included AI in their oversight. This suggests many companies are still working to establish robust controls.

Directors Take Note

Directors understand AI presents both opportunities and dangers. Many are thinking about strengthening oversight through education and clear frameworks. These insights emphasize the need for companies to proactively manage the risks associated with AI.