CIOs Can Strengthen Oversight Through Reporting, Records and Insurance Reviews
An artificial intelligence hallucination, data breach or misleading claim about system performance can become a boardroom issue when it affects a company’s financial results, prompts regulatory scrutiny or attracts attention from customers and the public. Carolyn Rosenberg and Andy Moss, partners in Reed Smith’s Insurance Recovery Group, said CIOs have a central role in helping companies govern, document and insure against these emerging risks.
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Boards face competing pressure to adopt AI quickly while maintaining effective oversight of the technology. Moss said directors generally must be reasonably informed and have adequate reporting systems that bring significant risks to their attention. The business judgment rule gives boards latitude to make reasonable decisions, even when those choices later prove unsuccessful, but it doesn’t excuse the absence of reliable information or escalation processes.
“I don’t think you can silo this, and I think that’s where you get into some trouble,” Rosenberg said.
AI risk can touch technology, legal, compliance, audit, customer relations and corporate communications. Rosenberg said companies should routinely update boards on developments, peer practices and risks specific to their operations. Committees can examine the details before presenting directors with a clearer summary of decision points, unresolved concerns and potential actions. CIOs also need reporting systems that help employees escalate problems promptly and enable executives to communicate material issues to the board.
In this video interview with ISMG, Rosenberg and Moss discussed:
- When AI incidents rise to potential board-level D&O exposure;
- How CIOs can create reliable reporting and governance records;
- How to stress-test D&O, cyber and technology E&O coverage.
Rosenberg and Moss are partners in Reed Smith’s Insurance Recovery Group. They advise companies and executives on D&O coverage, corporate governance and emerging technology risks.
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