THE NOVEL ETHICAL AND REPUTATIONAL RISKS OF DIGITAL TRANSFORMATION
To capitalise on opportunities and keep up with the competition, many companies are adopting digital solutions at an unprecedented rate. Indeed, whether companies should look to emerging technologies to propel their businesses forward is no longer even a question. But the solutions are as varied as they are complex. Artificial intelligence (AI), blockchain, virtual reality (VR), augmented reality (AR) and the Internet of Things (IoT) are some of the most popular solutions companies are employing. But while they promise great opportunities, these technologies also come with ethical and reputational risks that scale as fast as the solutions themselves. Accordingly, risk officers in the digital space have a novel set of concerns, apart from standard cyber security worries.
These risks are not hypothetical. Goldman Sachs, which rolled out Apple’s new credit card, is under investigation by regulators for using an AI algorithm to set credit limits for individuals that, allegedly, discriminates against women. Optum is also under investigation by regulators for an AI that recommends which patients doctors and nurses should most immediately tend to. The problem is that the AI, allegedly, recommends that they pay more attention to white patients than to sicker black patients.
IBM is in trouble for alleged mishandling of consumer data collected via its weather app; Los Angeles has filed a lawsuit against the company. And Sidewalk Labs, a Google subsidiary, recently pulled out of a project to leverage the IoT to create a ‘smart city’ within Toronto, Canada, due to backlash from the government and citizens around the lack of transparency about what data would be collected, how it would be used and who it would be shared with. The smart city concept was an ethics lesson that cost Sidewalk Labs US$50m.
A few questions immediately present themselves. What is meant by ‘ethical risks’? Why are these novel risks and what, exactly, are they? How do we manage them?
Jul-Sep 2020 Issue
Virtue