Governance, Risk, and Compliance Consultant, 08/2016 to Current. 3. I came to know that there were no consistencies within risk governance parameters, such as risk appetite, or risk threshold, for example. The OCEG (formerly known as "Open Compliance and Ethics Group") states that the term GRC was first referenced as early as 2003, but was mentioned in a peer reviewed paper by their co-founder in 2007. ML Operations This section focuses on AI use cases where interpretability/explainability is required by law or is otherwise appropriate. What does a strong GRC strategy look like? Some of the attacks in this category are known as label-flipping and frog-boil attacks. But, many of us believe that risks create an adverse impact on projects; it is not always true. Accuracy drift can make your model worse. Sample risk committee charter. Data drift, on the other hand, helps enterprises understand the change in data characteristics at runtime. What are Emerging Risks? Integrate IT risk management with business risk management by creating a paper trail for key risks. This GRC guide is here to help you learn more about it and what you can do to pplement the right processes in your business. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Submit RFP. An AI/ML system is generally as effective as the data used to train it and the various scenarios considered while training the system. Patrick Hall, Advisor at H2O.ai, Principal Scientist at bnh.ai, Visiting Professor at GWU Once highlighted, the scale and scope of the GRC program can be decided. Business, Technical, Systems, Risk, and Project Management. These regulations could be legal mandates, like privacy or environmental laws, or voluntarily established company policies and procedures. In this attack, an adversary tries to steal the model itself. Risk governance is created, and the risk governance framework is also elaborated. In the next . Centralize the data you need to set and surpass your ESG goals., The Big Shift: How Boardrooms Are Evolvingand How Leaders Should Respond. The roles/activities below provide some examples for organizations that are discussing roles and responsibilities with respect to AI implementations to consider. These could potentially damage the reputation of the company and lead to significant legal costs. In such circumstances, however, additional or revisions to policies and standards may be necessary to ensure that AI is deployed appropriately. Explanation inconsistency could also rear its head when systems are refreshed. Then, the best suitable governance layer is decided. Governance Risk. Now To Risk Management. And if you are interviewing for a risk management role, use these question prompts as a way to get ready for your meeting with the hiring manager! Hence, when risks were reported, team members didnt understand, or if they did, they wouldnt know how or whether to act. % AI systems could potentially amplify risks relating to unfairly biased outcomes or discrimination. READ OUR POSTS For example, the fact that a country adopts and enforces a seismic building code is as . We reference these legal and regulatory considerations to illustrate existing standards that already apply to many algorithmic activities of financial institutions, especially as they relate to unfairly biased outcomes. Lack of context, judgment, and overall learning limitations may play a key role in informing risk-based reviews, and strategic deployment discussions. For example, a link to the relevant risk analysis reports will make the discovery and retention of required information easier. For example, the Millennium Dome attracted 5.5 These examples show that defining what we mean by success has a significant impact on whether we believe a project has failed. Ruchir Puri, Chief Scientist, IBM Research, IBM Fellow at IBM [5] The response to the questions do not reflect future plans of the institutions. The movers and shakers of tomorrow are taking risks today. Existing Legal and Regulatory Frameworks . Breaking compliance could result in devastating financial, legal and reputational consequences. Members of the AIRS group have seen firsthand the positive impact these principles could have, and actively encourage their further development, including as appropriate in conjunction with any data governance efforts regarding ethical use of data. Data as a Cause of Discriminatory AI The use and potential for misuse of big data is no longer a theoretical concern and should be considered in determining the types of data that may be used in developing AI/ML systems. Change risk. His web presence is athttps://managementyogi.com, and he can be contacted via email atmanagementyogi@gmail.com. This act exemplifies governance in the truest form. A Center of Excellence (CoE) may provide a knowledge-sharing platform in an organization. A lot of the reasons are procedural relating to scope definition , methodology, and communication, for example, but there is a common theme: an inadequate risk identification process. Satya Narayan Dash is a management professional, coach, and author of multiple books. Connectwith Diligenttoday to understand how theright set of governance solutionsandcompliancesoftwarecanaccelerateyour GRC strategy. AIRS is not advocating for new regulation(s), but merely would encourage readers to monitor existing regulations and their potential applicability to AI. The ERM process is also determined by the Executive Management. Importantly, evidence of disparate impact is almost always assessed independently of the accuracy and validity of the system. Compliance is defined as acting within the rules. A project charter is a brief, formal document that outlines a project in its entirety including its objectives, key stakeholders, major milestones, risks, and budget. Clearly, the risks of litigation are very real for CISOs and their organizations, but what are the greatest areas of concern and what can they do about it? The sample risk governance framework illustrated below shows a reporting structure that allows for independence and enables horizontal and vertical challenge. What is GRC? Drift may lead to multiple types of errors and risks in AI systems. The how aspects are about organizing and doing the work. The following are common examples of internal risks. Such a coalition may be formalized in a Center of Excellence (CoE), working group, or council, among other examples. General Data Privacy Regulation (GDPR), among others. For implementation of these risk responses, a number of actions were needed. Priti Ved, Bloomberg. Formal HR governance includes risk management, as well as policy and program governance. AI solutions are already being used by some firms in areas like fraud detection, capital optimization, and portfolio management. In other words, just because a given system is statistically sound does not mean that it is legally non-discriminatory. Minimizing disparate impact may focus on feature selection whereby typically one or two variables that drive disparate impact are excluded from the system, while a few other variables are tested as replacements. The Project Management Institute also reports that in the projects that were deemed failures, the following causes were contributing factors: change in project objectives (37%), inaccurate requirements gathering (35%), inadequate vision or goal for project (29%), failure to identify opportunities and risks (29%), inaccurate cost estimates (28%), and poor change management (28%) amongst others. Provide IT Compliance oversight. They may also create and maintain data sets for the purpose of training AI systems. Instead of a formal risk register designed to calculate risk severity, a lightweight risk management approach may simply maintain a list in your weekly status report. For example, a company may be subject to an investigation by a regulatory authority due to a violation of laws and regulations. This both increases the importance of interpretability in AI/ML systems generally and highlights the compliance-related risks associated with their use. He is the author of The Why and How of Auditing , Audit Risk Assessment Made Easy , and The Little Book of Local Government Fraud Prevention. Some were taken, but most ignored or overlooked because of other projects and lack of understanding of risk management at an organizational level. https://www.mpug.com/understanding-qualitative-risk-analysis/. See, for example, Transforming Paradigms: A Global AI in Financial Services Survey, World Economic Forum, January 2020, available at http://www3.weforum.org/docs/WEF_AI_in_Financial_Services_Survey.pdf. Yes, portfolio, program, and project management will still exist, but when it comes to governance there are some key distinctions, which can be summarized by this line. Definitions and supporting documentation should provide clarity related to how various stakeholders including Senior Management, Legal, System Developers, Compliance, and Information Security Officers identify with the AI definition relative to other well-established definitions.[6]. Generally, if the attack is successful, an attacker could determine, to a certain degree of probability, whether a particular record was part of the training data set used to train the AI system. For example, as noted, a program manager is overseeing multiple projects, or programs. This is especially true where each new data iteration dynamically optimizes the AI system and improves upon it a chatbot, for example, learning and tuning its response with each customer interaction. An effective implementation involves: Focusing on the above can help you prioritize your needs and select the right array of tools and processes that support your goals without slowing down or overcomplicating day-to-day operations. Governance typically involves the organizations key decision-makers, such as its board members or high-level executives. These include: increased comfort for the Board and senior management that risks which impact the business are being managed effectively a structured approach to implementing an effective and consistent risk management framework In fact, this support is the main objective of the ERM. Such malicious inputs are known as adversarial inputs. On the other hand, risk tolerance is when the investor or . Depending on the use case, Firms may consider including contractual clauses for third parties regarding the AI systems testing methodology, explainability of the results generated by the system, and/or intellectual property rights which may be derived from use of the system. There are many examples throughout history that illustrate the importance of teamwork. But with this guide to risk management, we can help you prepare for it. Strengthening and rationalizing these processes can help improve business performance and enhance decision-making within corporate governance boards. If a team possesses a high level of psychological safety, does this increase the likelihood that one of its members might feel safe taking a risk which goes beyond the risk tolerance of the team, the line of business or the organization as a whole? 04/29/2021, 9:24 am. Data Quality Most people think of risk as pure risk, as a possibility of loss. AI governance frameworks could help organizations learn, govern, monitor, and mature AI adoption. Because this document attempts to form a starting point for broader AI/ML governance and risk management efforts, we purposely leverage and encourage readers to refer to various papers for the definition of AI. Now acting within the BPM rules involves avoiding risks when negative, and taking advantage of them when they can add value to the business. The success of scaling up RPA business lies in proper governance that may organize proper guidance, processes, and mechanisms to manage and control the RPA activities to realize the . System misspecification may also cause discriminatory outcomes. Who will own the project risks. AI, in certain use cases, could lead to privacy issues, and/or potentially discriminatory or unfair outcomes, if not implemented with appropriate care. For example, governance bodies are expected to manage financial, competitive and information security risks. Enterprise risks can be cascaded down to the respective suitable layer, if they can be managed at that level. Monitoring for Drift Those standards and practices are called corporate governance, and they are going to influence your project. In contrast, an environmental inspector might search a construction site for environmental code violations and take the necessary steps to address them.. It can be the portfolio governance layer, program governance layer, or projects governance. Inventories might also list key data elements for each AI/ML system, including any feeder systems/models, the owners, developers, validators, and key dates associated with the AI/ML lifecycle. From Aspiring RMP to Actual RMP What Does It Take to be an RMP? Compliance Governance bodies are accountable for compliance to laws and regulations. AI system evaluation could involve benchmarking against alternative models and applying known techniques to enable model interpretability, where applicable and feasible. Such systems are generally not considered legally discriminatory if they and their constituent features could be demonstrated to meet a legitimate business need and where no less discriminatory alternative system or process could be identified that also meets those needs. Brennan Lodge, Data Science Lead at Goldman Sachs Bias By viewing our content, you are accepting the use of cookies. Take for example the deployment of an ERP system, the installation, and startup of a process control system, the release of a suite of embedded software controllers for a car, aircraft, petrochemical plant. With this in mind, there are ways to make the launching of the GRC program more straightforward. [1] Online Course: RMP Live Lessons Guaranteed Pass, by Satya Narayan Dash, [2] Online Course: RMP 30 Contact Hours, by Satya Narayan Dash, [3] Book: I Want To Be A RMP, The Plain and Simple Way To Be A PMI-RMP, Second Edition, by Satya Narayan Dash, [4] The Standard for Risk Management in Portfolios, Programs and Projects, First Edition, by Project Management Institute (PMI). There can be various types of governance such as organizational governance, portfolio governance, program governance, etc. Widespread AI/ML adoption within the financial services industry could provide a unique opportunity to significantly improve financial outcomes for consumers and businesses, if this is done responsibly. The evolving field of adversarial learning may help with building secure machine learning systems as it matures. Its one of many, from my RMP Live Lessons. Control Risk. Additionally, stay ahead of the curve with governance, risk & compliance news and insights delivered to your inbox. Three Lines of Defense Ask 10 different risk management experts to define emerging risks, and you will likely receive different points of view. Turn this off at any time. Risk Management is Project Management for Adults - Tim Lister. There is a governance board which oversees the ERM and its framework. Identified risks are analyzedboth qualitatively and quantitatively. For example, suppose a credit system included whether a person tended to shop at a discount store. If you are preparing for the Risk Management Profession (RMP) examination, you need to be aware of both these concepts. Please find below a transcription of the audio portion of Satya N Dash session, Risk Management Life Cycle in the Context of Project, Program, and Portfolio, being provided by MPUG for the convenience of our members. The role is mostly operational, meaning it involves planning and governance for overseeing the program and its successful delivery. Projects can exist independently, but usually they exist within a program or a portfolio, which in turn are held within an enterprise or organization. Planning Project Management ProjectManager Blog Risk Management. This definition provides the foundation and establishes a clear understanding of the other components of the governance structure, informing the remaining building blocks that comprise the overall AI program (e.g., inventory). It assesses the effectiveness of the first and second lines of defense in achieving risk . In this article, well answer the following questions: GRC stands for Governance, Risk and Compliance. This document is meant to be the first of several iterations and further contributions from the AIRS group. The author asked what needs to be considered when planning risk responses. Any changes in technology will require an element of engagement or training. Opportunities usually dont. Governance boards can access the platform anytime, anywhere, across a range of devices. Risk governance is all about coming with an organizational structure to address a precise road map of defining, implementing, and authoritative risk management. Indeed, security is evolving in the world of AI/ML, and interpretability plays a major role in ensuring that such systems are protected. ERM ensures that all organizational risks are properly identified, addressed, managed, and monitored. In this organizational context of risk management, these are the key points related to risk governance: Now, lets look at the differences between Risk Governance and Risk Management. For example, a compliance officer at a software company might work to ensure that their systems abide by regulations like GDPR. Most lending institutions employ compliance, fair lending, and system governance teams that review input variables and systems for evidence of discrimination. On the other hand, portfolio risk management derives its policies, processes, methods etc. Oversight Processes Red team or white-hat hacking audits or exercises to test AI/ML systems may, for example, use variants of posthoc explanation techniques in system stealing, system inversion, and membership inference attacks against AI/ML systems. Beyond the above key difference, Ive noted some more differences between governance and management in the below table. Its possible that at each level of PPP governance, one can have a risk governance model, which is part of the corresponding Ps governance. Work History. If the risks arising within these departments are managed individually, without a holistic or overall view of the risks from the organizations perspective, the result is siloed risk management. moreover, risk management can be considered as part of the broader area of clinical governance which is defined by chandraharan and arulkumaran as a 'framework through which nhs organisations are accountable for continuously improving the quality of their services and safeguarding high standards of care by creating an environment in which Research clearly shows the root causes of most software projects cost and schedule overruns and technical shortfalls comes from poor risk management. Depending on the control library of an institution, this may require participation from multiple control owners and requires a structured approach and thorough planning. However, for the best application of ERM, a common approach to risk management is needed. An oversight process based on thorough monitoring to validate the outputs, thresholds, and other aspects of the system could help maintain the overall accuracy and efficiency of AI systems. Enjoy a multi-channel experience with mobile, automated emails, dashboards, curated newsletters, API, finished reports, etc. However, for your strategy to be more scalable, sustainable and cost-effective, focusing on the latter approach is more likely to give you the results youre looking for. This thesis, structured around three interrelated empirical essays, investigates the relationship of corporate governance with firm risksdefault, stock liquidity, downside and upsidefor a large sample of Australian listed firms (more than 1,000) over the period from 2001 to 2013. Risk Angles Corporate governance was more straightforward back in the day when roles were defined simply as "management acts, the board oversees." But today, that approach may not hold up not when boards are scrutinized from all sides by regulators, shareholders, the media, and analysts, to name a few. The danger in this is creating too many disconnected silos that slow down communication, limit access to critical information and duplicate activities due to a lack of transparency and knowledge across the organization. The concept is to unify and align an organizations approach to risk management and regulatory compliance. Governance is the system of rules, practices, and processes an . Most of the known potential attacks against AI/ML systems could be grouped into one of the following categories: data privacy, data poisoning, and model extraction. Over 100 analysts waiting to take your call right now: 1-519-432-3550 x2019. Poor implementation may arise from biased data, the AI system itself not being properly trained or when there are alternate systems and data sources that could potentially be used to generate better outcomes for disadvantaged groups. Ensuring Quality Explanations Disparate treatment discrimination could occur when similarly situated individuals are treated differently based on a prohibited basis, but the treatment does not have to be motivated by prejudice or an intent to discriminate. [12] For a further discussion of potential and utilized techniques that can mitigate the disparate impact in financial services, see Nicholas Schmidt and Bryce Stephens, An Introduction to Artificial Intelligence and Solutions to the Problem of Algorithmic Discrimination, Conference on Consumer Finance Law (CCFL) Quarterly Report, Volume 73, Number 2 (October 2019) available at https://arxiv.org/abs/1911.05755. PMI, PMP, and PMBOK are registered marks of the Project Management Institute, Inc. Online Course: RMP Live Lessons Guaranteed Pass, The Standard for Risk Management in Portfolios, Programs and Projects, Protecting Contract Deliverables With Schedule Risk Analysis and Schedule Margin, Create a 5/4-9 Calendar in Microsoft Project. See also, Brainard, What Are We Learning about Artificial Intelligence in Financial Services? Depending on the scale of adoption, a formal approval process might be put in place, governed by a central body having subject matter expertise from various fields. Here are five tips for implementing a GRC framework in an organization. Effective governancerelies on using various data, information and hard evidence to develop strategies and make decisions. IRGC develops concepts and tools for evidence-based risk governance. As AI use advances and becomes more widespread within the industry, AIRS acknowledges that there are multiple ways to govern potential risks and any risk management framework should be tailored to each individual firms unique circumstances. GRC by its very nature is far-reaching and comprehensive, as the process will review the breadth of an organization. Management, the how aspect. Organizations that can implement a cohesive, integrated set of processes and technologies can expect benefits like: The standard components of a strong GRC strategy include, but are not limited to: Many organizations approach GRC by constructing overly complex and specialized programs in risk management, performance management, compliance, internal auditing and corporate social responsibility. Organizations employ a governance, risk, and compliance (GRC) strategy to handle interdependencies between corporate governance policies, regulatory compliance, and enterprise risk management programs. It can be both normative and positive, because it analyses and formulates risk management strategies to avoid and/or reduce the human and economic costs caused by disasters. Too often, organizations believe that buying a singleGRC softwaresystem or forming a specialized department will help resolve all of their GRC-related concerns. Monitoring could also assess if input data significantly deviates from the models training data, which could help inform the identification of data drift.. 5. Testing for all scenarios, permutations and combinations of available data may not be possible, thus leading to potential gaps in coverage. The newsletters include helpful how-to articles, information on upcoming training webinars and events, Project news, project management job postings and much more! Unlike humans, AI systems lack the judgment and context for many of the environments in which they are deployed. Such an inventory might describe the purpose for which the system is designed, its intended use, and any restrictions on such use. The primary U.S. federal statutes that define illegal discrimination in lending are the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA); however, lenders are subject to many other federal regulations and state laws addressing fairness. Algorithms themselves may result in discriminatory outcomes exacerbated by their complexity and opacity. Further testing and research need to happen before leveraging such algorithms in a production environment. The overall performance of the business should improve as a result. For example, one suggested method for maintaining the privacy of the training data is differential privacy. But in fact, risk management is part of the other 4 principles as well. Another aspect is negative risks (threats) literally knock on your doors. As such, we note that specific definitions should be (and generally are) tailored to each organization depending on the scope, risk appetite, internal structure, culture, and implementation details of AI/ML efforts. As of this writing, there is no commonly agreed upon standard definition of AI explainability. Identification of risks, assumptions, and constraints. Risk governance, at the chosen layer, guides in identification and assignment of risk owners. GRC also refers to an integrated suite of software capabilities for implementing and managing an enterprise GRC program. Prevention of model extraction attacks could potentially be achieved using strong information security practices; however, the identification of an extracted model is possible with a method known as watermarking. Recently, the notion of risk governance has been introduced in risk theory. Planning ProjectManager Blog Risk Management. Note that identification of potential AI/ML risks (as set forth in Section 2) is critical to formulating an operational risk and control framework. Therefore, if you dont know about corporate governance, you better learn what it is and what it can do to your project management. Examples of newer and perhaps relatively more accurate and sophisticated types of interpretable AI/ML systems include scalable Bayesian rule lists, Explainable Boosting Machines (EBMs), monotonic Gradient Boosting Machines (GBMs), various Bayesian or constrained variants of traditional AI/ML systems or other novel interpretable-by-design systems.[9]. Please verify your previous choices for all sites. The inclusion of risk and crisis management, supply chain management, and tax strategy criteria differentiates the RobecoSAM EDS from a traditional governance score that relies heavily on more standard corporate governance metrics. Assisting risk owners with risk evaluation by taking into account the institution's risk appetite. Cloud Governance Model Principles. Even though data quality requirements are not specific to AI/ML, data quality has significant impact on AI systems, which learn using data and provide output based on that learning. Model extraction attacks are potentially the most impactful types of AI/ML attacks, as the stolen model could be used as a tool to create additional risks. For example, you might have to get citizen approval before you can move forward with your plan. Risk Management is essential for development and production programs. This reflects how risk is valued against a backdrop of broader social and economic concerns. The AIRS working group, based in New York, was initiated in early 2019. The purpose of an inventory is to allow the organization to identify and track the AI/ML systems it has deployed and monitor associated risk(s) (if any). More recently developed approaches minimize discrimination by focusing on data pre-processing, within-algorithm decision making, and output post-processing. Good governance is a cornerstone of #project success, so poor governance inevitably leads to project failure. Why was it running for a such a long time with little or no risk management? So you can do your corporate budgeting, for example. If you do not select a country we will assume you are from the United States. There should be regular communication and clarity about the objectives to all members of the organization. A portfolio internally contains programs and projects. GRC is the integrated collection of capabilities that enable an organization to reliably achieve objectives, address uncertainty and act with integrity GRC as an acronym denotes governance, risk, and compliance but the full story of GRC is so much more than those three words. stream Because AI/ML systems are probabilistic, they may make incorrect decisions. We address these sub-categories in further detail below. Considering PPP based management approach, the following should be noted about ERM: Based on this understanding, we follow the below figure: As shown, ERM supports an organizations vision, mission, goals, and strategies. Keyvan Kasiri, Bank of Montreal Given the results of this survey, which shows that the financial services industry is focused on AI, and potentially in early stages of adoption, the industry would benefit from a common set of definitions and more collaboration in developing risk categorization and taxonomies. For implementation of these risk responses, a number of actions were needed. However, this could be an internal risk to the organization as strategy originates with management. A seismic building code is as implementations to consider production programs a production environment derives policies! 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Laws, or council, among other examples in a production environment fair lending, and processes.... Could also rear its head when systems are protected also refers to an integrated suite of capabilities. Ive noted some more differences between governance and management in the world of AI/ML, and portfolio management risk. The portfolio governance layer is decided abide by regulations like GDPR horizontal vertical! Not always true you do not select a country we will assume you are accepting use! Web presence is athttps: //managementyogi.com, and monitored now: 1-519-432-3550 x2019 to manage financial, legal and consequences... Used by some firms in areas like fraud detection, capital optimization, and author of multiple.... Reports will make the launching of the environments in which they are deployed ERM, a program manager is multiple... Concept is to unify and align an organizations approach to risk management at an organizational level does mean!