Day: July 26, 2023

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Auditing AI

The recent kerfuffle over an AI tool misinterpreting instructions to make a woman look more professional as making her look Caucasian has raised important questions about how to audit AI code to avoid undesirable outcomes. AI instruments are behaving in a fundamentally different way than most other types of apps and systems, and auditing AI code for implicit bias is not yet feasible. Matt Kelly recently wrote a blog post on this topic on Radical Compliance. I thought it would make a great podcast so this week’s episode of Compliance into the Weeds is dedicated to it. I also thought it was so important that I should blog about it as well.

It started when MIT grad student Rona Wang tested an AI tool called Playground AI to modify a photo of herself wearing an MIT T-shirt to look ‘more professional’. Rather than replacing the T-shirt she was wearing with more professional business attire to achieve a more professional look, the AI tool interpreted the instruction to make her look more professional as making her look Caucasian. Wang posted a before and after comparison of her photo on Twitter, which caused a big kerfuffle in the AI world about how this happened. The CEO of Playground AI responded to Wang on Twitter saying “We’re quite displeased with this and hope to solve it”.

We began with a discussion of the implications of implicit bias in AI code. Matt suggested that the code in the AI app may have been influenced by the disproportionate number of white people on LinkedIn. It may not be the fault of the AI program, but rather a result of structural bias and racism in the world. Matt believes that at this point, it is impossible for a human to audit the code of AI programs like Chat GPT, which evaluates data according to 1.76 trillion different parameters. Unfortunately, it is not possible to eliminate implicit bias in AI code by simply correcting a few parameters. Matt compared it to the difficulty of eliminating implicit bias in AI code to the difficulty of eliminating racism in the human brain.

AI can handle 1.7 trillion parameters of data, but it is difficult to audit for an ethical outcome. AI can misinterpret structural racism and inequities that exist in the world. AI can be used to filter out images that are not representative of the population as a whole. Auditing AI is difficult because there are few people who know how to design and audit these programs. AI decisions may have life and death consequences, but there is no way to audit them yet.

Companies using AI in the hiring process must consider whether they will scrap the AI tool and use another, use human HR people and recruiters, or have auditors and coders sit down and try and figure out the problem. Additionally, there is a risk of implicit bias when someone must define the pool of data that the AI is looking at. New York City has a regulation requiring employers to audit AI tools used in the hiring process at least annually, but this is only a small step towards addressing the issue of implicit bias in AI.

Auditing AI code for implicit bias is a complex process. AI tools used in the hiring process can range from keyword matching to Chat GPT. While it is important for companies to audit their AI tools, it is also important to consider the data that is being used to train the AI. If the data is biased, the AI will be biased as well. To ensure that AI tools are not biased, companies should consider using a diverse set of data and conducting regular audits of the AI tools.

The Wang incident over an AI tool misinterpreting instructions to make a woman look more professional as making her look Caucasian is a reminder of the importance of auditing AI code to avoid undesirable outcomes. AI instruments are behaving in a fundamentally different way than most other types of apps and systems, and auditing AI code for implicit bias is not yet feasible. Companies using AI in the hiring process must consider whether they will scrap the AI tool and use another, use human HR people and recruiters, or have auditors and coders sit down and try and figure out the problem.

Finally, there is a risk of implicit bias when someone has to define the pool of data that the AI is looking at. New York City has a regulation requiring employers to audit AI tools used in the hiring process at least annually, but this is only a small step towards addressing the issue of implicit bias in AI. To ensure that AI tools are not biased, companies should consider using a diverse set of data and conducting regular audits of the AI tools.

For the complete discussion of this issue check out this week’s episode of Compliance into the Weeds.

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Compliance Into the Weeds

Compliance into the Weeds: Auditing AI For Compliance

The award winning, Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. Looking for some hard-hitting insights on sanctions compliance? Look no further than Compliance into the Weeds! In this episode, Tom and Matt consider the current difficulties for auditors to perform an audit on AI.

The use of AI in the tech world has brought with it a new concern: implicit bias. Auditing AI code is necessary to ensure that AI applications are free from bias and secure from cyber threats. This complex process involves examining the code of AI programs to ensure that they are functioning as intended and are not producing biased or unethical outcomes. In addition to auditing code, employers must also audit the outcomes of AI tools, and consider ethical considerations when defining the data that the AI is looking at. As AI hiring audits become increasingly necessary, it is more important than ever to ensure that AI applications are free from bias and secure from cyber threats.

 Key Highlights

·      AI Implicit Bias

·      Auditing AI Code

·      AI Hiring Audits

 Resources

Matt 

LinkedIn

Blog Post in Radical Compliance

Tom 

Instagram

Facebook

YouTube

Twitter

LinkedIn

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The Hill Country

Hill Country Podcast – Zach Riffett – Leadership Kerr County Class 2023-24

Welcome to the award-winning The Hill Country Podcast. The Texas Hill Country is one of the most beautiful places on earth. In this podcast, Hill Country resident Tom Fox visits with the people and organizations that make this the most unique area of Texas. Join Tom as he explores the people, places, and activities of the Texas Hill Country. In this episode, Tom is joined by co-host Andrew Gay to find out more about the 2023-24 class for Leadership Kerr County.

Are you looking for a way to develop your leadership skills and make an impact in your community? Look no further than Leadership Kerr County! This nine-month program is designed to provide leadership training and development for people in the Kerr County area. With an August 1 deadline for applications, now is the perfect time to apply.

Today’s guest is Leadership Kerr County co-chair Zach Riffett and Andrew Gay is part of the steering committee. Zach is a financial planner with Edward Jones and has been in the Kerr County area for the past 10 years. He is passionate about making an impact in the community and is involved in several boards and committees, including PTO, United Way, and Chamber committees.

The program is highly regarded by other leadership programs in contiguous counties, and people in the Kerr County area can ask their peers and coworkers if they have been through the program. Last year’s Leadership Kerrville class was mostly women and had some amazing leaders. This year, the Chili Cook-Off is changing hands and there may be some shuffling of the days. The application has been updated to ask different questions and dig deeper into why people want to participate. However, the leadership, committee, and basic structure of the class remain unchanged.

Participants in the program will learn about the community and its ins and outs. There are 8 days in the program: Education Day, Local Government Day, Trip to Austin, Government Day, Economic Day, Tourism and Travel Day, Nonprofit Day, and Retreat. The retreat is a great opportunity for team building activities and breaking down guards and is held at Mo Ranch and takes place in the third week of September. Remember the deadline for application is August 1.

 Resources

Andrew Gay on LinkedIn

Tom Fox on LinkedIn

Leadership Kerr County-Information and Registration

Categories
Daily Compliance News

Daily Compliance News: July 26, 2023 – The Farewell to the Bird Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance brings to you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News. All, from the Compliance Podcast Network. Each day we consider four stories from the business world, compliance, ethics, risk management, leadership, or general interest for the compliance professional.

  • EY General Counsel calls it quits. (FT)
  • Musk ditches the Twitter bird. (BBC)
  • Chinese official given death sentence for accepting bribes. (Barron’s)
  • UBS fined for Credit Suisse imbroglio over Archegos. (NYT)
Categories
31 Days to More Effective Compliance Programs

One Month to More Effective Reporting and Investigations – Board Investigation Protocols

Many companies have an investigation protocol in place when a potential compliance violation or other legal issue arises. However, many Boards of Directors do not have the same rigor when it comes to an investigation, which should be conducted or led by the Board itself. The consequences of this lack of foresight can be problematic, because if a Board does handle an investigation right, the consequences to the company, its reputation and value can be quite severe. The SEC considers a variety of factors around corporate investigations including: Did management, the board or committees consisting solely of outside directors oversee the review? Did company employees or outside persons perform the review? If outside persons, have they done other work for the company?

Dan Chapman has said this is the time for a very frank conversation with your Board about what such an investigation will entail. Costs must be adequately discussed to set proper expectations. These include both direct costs and, what Chapman believes may be even more important, a discussion of indirect costs to the company. He noted, “the biggest cost to a company during an investigation is the diversion of management resources” and, as he further explained, “everything stops to focus on the investigation.” This indirect cost comes through largely the time commitment of senior management. He further explained, “if senior management has to commit 20% of their time to the investigation, that’s 20% that’s not going towards revenue generating, shareholder value protecting activities.”

Finally, Jonathan Marks has noted after notification of serious allegations, Boards should take the following steps:

• Consider creating a Special Committee to conduct the investigation;

• Establish a committee charter;

• Preserve the electronic and hardcopy documentation environment;

• Communicate with external auditors; and

• Plan potential communication with the SEC, DOJ, and the relevant stock exchange.

Marks also notes that while a special committee might be necessary in certain rare circumstances, the Board should try to avoid forming a special investigative committee to oversee the investigation if the Audit Committee is composed of independent and disinterested directors that are suited for the task. A special committee must be disbanded at some point (usually once the investigation is completed and before the restatement process begins), and the disbanding could become a complicated news item. Conversely, if the Audit Committee oversees the investigation, then, once the investigation is complete, they can pivot back to their normal role, which would include overseeing the actual restatement process. Investigations overseen by the Audit Committee also benefit from the positive relationship that the committee chair usually has with the audit partner of the company’s external auditor.

 Three key takeaways:

1. The Board should have a written protocol for investigations prepared in advance.

2. Any Board led investigation must be both credible and objective.

3. The investigation must be thorough but the Board can be cost effective.