While the G20/OECD Principles of Corporate Governance do not specify operations and process improvement in their list of responsibilities, boards cannot carry out their oversight duties without considering how their companies use and manage technology and management’s major technology plans, investments and partnerships.
Many responsibilities that apply to other modules pertain to operations and processes:
- To act in good faith, with due diligence and care, boards should be fully informed about plans for applying AI in strategy, AI’s alignment with core values and ethical standards, the risks associated with AI strategy, and regulations affecting the use of AI. Directors should have access to accurate, relevant and timely information.
- To oversee corporate strategy, major plans of actions, risk management, and budgets and business plans, boards should review and guide management’s vision, goals, actions and expenditures for AI, its support for innovation and the use of new AI resources, management’s awareness and plans for legal compliance and ameliorating AI risk, and competitors’ use and plans for AI.
- To oversee corporate performance, expenditures and acquisitions, boards should review and guide AI’s alignment with strategy, shareholder values, ethics, performance and risk indicators, implementation of AI plans, the effectiveness of AI to accelerate processes and improve productivity, major investments in AI systems and talent, and acquisitions.
To carry out these responsibilities, boards should also review and guide these technology-specific concerns:
Act in good faith, with due diligence and care.
- Be fully informed about their company’s and competitors’ use of AI for process innovation, cost reduction and new competencies.
- Learn about the implications of these new processes for skill requirements and jobs.
- Be fully informed about the adoption of AI in their environment and the demands and expectations important partners will place on their company.
Oversee corporate strategy, major plans of actions, risk management, and budgets and business plans.
Directors should know:
- Whether management is developing strategies that take advantage of the new capabilities AI can bring to business processes.
- Whether investments in AI for operational transformations target important business outcomes and not only operational improvements with little impact on the top or bottom line.
- How the enterprise’s acquisitions and partnerships affect its ability to use AI to advance its strategy, and whether they introduce new risks.
- Whether processes using AI have identified bias and other ethical risks when AI is applied to business processes, and whether the plans of action include measures to address them.
Oversee corporate performance, expenditures and acquisitions.
Directors should know:
- What progress the company is making in applying AI to processes that differentiate their company from competitors.
- Whether management is building the resources needed to implement and operate AI-enabled process change.
- Whether, and how, AI should be factored into performance objectives for management.
- Whether key performance indicators (KPIs) and key risk indicators (KRIs) for business processes are aligned to the AI-enabled strategy.
- How the innovation process using AI is being encouraged across the organization.
- Whether the data used to train and operate AI systems is being properly managed.
- How internal control processes are reported to the board (pp. 58/66, principle D7).
- How to monitor and manage potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions (pp. 57/66, principle D6).
The analysis in this section is based on general principles of corporate governance, including the G20/OECD Principles of Corporate Governance, 2015. It does not constitute legal advice and is not intended to address the specific legal requirements of any jurisdiction or regulatory regime. Boards are encouraged to consult with their legal advisers in determining how best to apply the principles discussed in this module to their company.
The following suggestions can help the individual who prepares the board discussion and sets the agenda on process and operating model innovation through AI.
Before leading the first meeting
- Prepare yourself: Become familiar with AI, what it can do today to transform processes, and what it will be able to do in the future as the field advances. Separate the hype from reality by looking at the research and the sources behind the claims, and the issues that complicate the implementation of the technology. The resources section provides readings about AI and process improvement. Speak to senior IT, security and public affairs executives about any ethics issues on their minds.
- Gauge board member interest in AI and process innovation: Speak to other board members. Learn what importance they place on AI and the concerns they have about planned AI investments and partnerships. Identify the board members who are most interested in moving forward with new AI investments, and those who have concerns or lack interest.
- Set goals: Think ahead about the desired outcomes from the board discussion.
Set the initial agenda
Create a strategy for process innovation pilots. Agenda items can include:
- Presentation: Arrange for a briefing on how AI is being used to transform or improve the organization’s most important processes for generating revenues and serving customers. The presentation can include examples from competitors and potential use cases uncovered by researchers. They should also include revenue and other quantified benefits when possible. The presentation should also introduce major risks and responsibilities that the company will have to manage, and the requirements that must be met to run AI, such as the data for training AI systems.
- Discussion: Identify processes that are good candidates for pilots, based on: high potential value; availability of data; ability to implement and scale up if successful.
- Delegate: Decide which members of the executive team will be responsible for selecting and running the pilots as well as deciding what support is needed (technology, development platforms, innovation sandboxes etc.).
- Engage: Decide how the board will stay current with developments in process innovation.
Set follow-up or alternative agenda items. These can include:
- Innovation and experimentation: Discuss how the company is developing a culture that supports innovation with AI. This conversation can enquire about rewarding risk-taking, incentives, creation of innovation centres, office design and corporate values.
- AI in the ecosystem: Examine how AI will change the way companies work together within the supply chain, and what companies expect from suppliers. The discussion can include how AI can shift the bargaining power and the position of companies inside an ecosystem.
- The operating model of the future: Envision the new ways, end-to-end, in which the company gets work done, the new capabilities and cost structure this provides to the company, and how the new operating model supports or enables new business strategies.
- AI in R&D: Discuss how AI can be used to aid scientific researchers, product developers, competitive intelligence and market analysis, and the next steps.
- Future of work: Look at the new skills and roles the company will need to make AI process transformation a reality, and how the company will migrate to them. This can also include changing how employees work by providing them with AI tools.