According to a draft regulation released by the United States government, there is an imminent shift in Artificial Intelligence (AI) regulations over the next several years. The United States government has introduced an evolving regulatory framework involving various thresholds that may significantly change how businesses apply, monitor, and increase the use of AI Technology. Evidence from this draft suggests that the United States has begun to move from a system of advisory guidelines to enforceable regulations for the growing use of AI, and due to the growing reliance on AI for making decisions by businesses in society, there is increasing pressure from Governments to hold private and public businesses accountable for their actions, while ensuring all regulatory principles of transparency and security.
What are the Important Elements of the Draft?
The outline provided in the draft outlines an approach to the governance of all AI Technology using three principles: risk evaluation, operational responsibility, and restrictions on how data is used. The importance of these three principles indicates that businesses will have to comply with specific standards before using AI Technology in sensitive applications or in large quantities.
The United States has shifted its position when evaluating new innovations, such as AI technology, from just innovation to responsible usage. Government regulators appear to be prioritizing the development of safeguards designed specifically to mitigate the systemic risks associated with the use of AI Technologies.
Why Regulation Will Be Stricter
AI is being embraced across a variety of sectors (finance, healthcare, energy, among others) at such a rapid pace that current legal frameworks cannot keep up. With growing concerns about bias, a lack of transparency, and data security, policymakers have introduced new demands for stricter regulation.
The increased push for stronger regulation of AI in the US is driven by recognition of the negative consequences of unregulated AI use (e.g., discrimination, security vulnerabilities, and ethical concerns), as well as advances in technology.
The Consequences for Enterprises
The introduction of strict compliance rules for the development and management of AI will require organizations to fundamentally shift their operations to comply with the new regulations.
This shift will require that organizations:
Create robust governance structures for AI systems
Document the behavior of AI models, as well as the process used to make decisions based on AI models
Conduct periodic audits of the performance of AI-based systems
Ensure compliance with regulatory standards
These requirements will increase the complexity of an organization’s operations, while also providing an opportunity to build confidence and improve system performance.
The Increased Risk of Non-Compliance
One of the most important aspects of the draft policy is that non-compliance with the new standards will result in much higher penalties compared to past violations. If an organization does not comply with the new standards, it will face substantial financial penalties, operational restrictions, or significant negative publicity.
Therefore, enterprises must take immediate action to align with new AI regulations in the US, rather than wait until enforcement begins.
Accountability
The draft policy is a signal of an overarching shift toward accountability for AI use and development within organizations, where they are expected to take responsibility for how they perform as systems and the results they create.
This will require that any decisions made by an AI be explainable and justifiable, especially in high-risk environments such as granting financial access or making medical decisions.
Globally
While the draft policy is focused on the US, its impact is likely to be felt globally, as many nations will consider the regulatory process undertaken by the US as they develop their own policies.
Subsequently, the development of AI regulation in the US will help influence the international regulatory regime, making it easier for multinational corporations to comply with environmental regulations.
Obstacles
The transitional process to new regulatory compliance standards across the organization will not be easy, as many companies may endure:
- New compliance costs
- Need for thorough subject matter expertise.
- Integration Complexity with legacy systems
These obstacles will, however, be justified by the long-term advantages of better governance and reduced risk exposure.
Conclusion
It seems likely that AI governance will require a balance between providing innovation and adequate oversight. Organizations that embrace regulatory change sooner rather than later will be more adaptable than others as the market evolves.
The draft regulations provide some degree of clarity on what to expect. As mentioned previously in this document, AI will be held to a much higher set of standards for accountability, transparency, and control than anything we have seen to date. Organizations will find themselves at a competitive disadvantage if they do not prepare for the imminent regulatory environment and the penalties associated with it.
