Introduction
Boards must face up to risks and responsibilities that come with use of artificial intelligence
As artificial intelligence, and especially generative AI, continues to creep into corporate life at every level, from the humblest administrative processes to assisting boards in strategic decision-making, governance considerations often trail behind. Italy's new AI law, just approved by the country's parliament, raises a range of governance issues and highlights compliance risks for businesses that use the technology. In essence, human decision-makers, led by boards of directors, cannot escape responsibility for AI output and its consequences, although attributing legal liability may prove problematic. Corporate capability and resources may also be an issue – while almost all hedge fund managers say they have now adopted generative AI, according to a survey by the Alternative Investment Management Association, only large firms tend to have strict governance and controls in place.
Key Governance Developments
Italy becomes first EU member state to introduce artificial intelligence regulation
Italy's parliament has approved the introduction of legislation on the use and governance of artificial intelligence, aligned with the EU's AI Act, making the country the first member state to enact national law applicable to the technology. The Italian legislation covers healthcare, work, public administration, justice, education and sport, requiring traceability and human oversight of decisions made by AI, and employers to inform staff when AI is being used. The law also introduces penalties for AI-enabled fraud and other misuse, although critics say attributing human responsibility for AI output could prove difficult.
Best source: Reuters (subscription required)
See also: Security Management Magazine
Hedge fund managers expand use of generative AI but governance challenges persist
Nearly all hedge fund managers have now adopted generative AI, according to a survey by the Alternative Investment Management Association. It finds that 95% of managers are using the technology and around three-quarters say they have increased their reliance on it. Larger managers tend to have stricter governance and controls in place, but many smaller businesses permit unrestricted use, which has heightened concern about data security. Most managers say they prefer to train their own staff on use of AI rather than recruit external specialists and report that widely used tools include ChatGPT and Microsoft's Copilot. The survey identifies risks including data breaches and AI hallucinations and finds that only a minority of hedge fund firms has invested in proprietary AI models, citing the high cost as a barrier.
Best source: Börsen-Zeitung (in German, subscription required)
Outgoing CEO sells €53m of Mediobanca shares as Monte dei Paschi gains full control of investment bank
Mediobanca's outgoing CEO, Alberto Nagel, has sold a further 465,222 shares in the bank worth around €10m, taking his total proceeds from recent sales to more than €53m. Nagel, who led Mediobanca's campaign against the hostile bid from Banca Monte dei Paschi di Siena, resigned along with the rest of the board as the bidder obtained acceptances for a majority of Mediobanca's shares. By the close of September 19, Monte dei Paschi had secured 70.5% of Mediobanca's equity, giving it full control.
Best source: Reuters (subscription required)
See also: Ansa
European banks increase recruitment of sustainability specialists to boards: EY
European banks have overtaken insurers and asset managers in appointing board members with sustainability expertise, according to EY's latest European Financial Services Boardroom Monitor. More than 90% of bank boards now include at least one sustainability specialist, while the proportion of new board appointments with environmental and social impact credentials has risen by 10% across the sector over the past year.
Best source: The Banker
UK electronics retailer Currys shuts down ESG committee
UK electronics and telecommunications retailer Currys is shutting down its dedicated ESG committee and allocating its responsibilities to other governance structures within the group. The committee was established in 2023, but its duties will now be shared between the board, its audit committee and an existing group sustainability leadership team. ESG committee chair Eileen Burbidge left the Currys board after its annual general meeting on September 4.
Best source: Investing.com
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