Imagine a virtual meeting in which an employee’s avatar nods in agreement. A colleague interprets that gesture as support for a business decision. But software, not the employee, generated the nod. Would your organization know the difference? More importantly, would its approval controls?
That hypothetical illustrates the governance challenge Patrick Henz raises in “The psychological impact of the Metaverse.” Henz explores how virtual environments could reshape socialization, identity, trust, and decision delegation to artificial intelligence.
His article is explicitly a prediction and an invitation to discussion, not proof that every anticipated psychological effect will occur. That distinction matters. Compliance should neither dismiss emerging risks nor present speculation as established evidence. Metaverse. Henz: For Chief Compliance Officers, the central question is practical: How should a company govern an environment that could influence both what people do and how they understand their relationships with technology?
Start with the Environment, Not the Marketing Label
Henz defines the Metaverse as interconnected, persistent virtual worlds with continuity of identity, communications, assets, and other data. An isolated virtual meeting platform does not satisfy that definition simply because its supplier uses the label. He also distinguishes professional and educational applications from private and leisure uses, while recognizing that the boundaries can overlap. His professional examples include learning with digital twins and using gamification to support participation. Metaverse. Henz
For compliance, this suggests beginning with the actual business activity. Is the company providing training, facilitating collaboration, selling products, or allowing software to represent employees? Each purpose warrants different controls. A simulation for practicing equipment operation raises different questions from an autonomous representative participating in a confidential negotiation.
Before approving a pilot, document its purpose, participants, data flows, and permitted actions. Identify which functions remain under direct human control. Assess the proposed activity rather than treating “the Metaverse” as a single risk category.
Socialization and Roles: Carry the Culture into the Platform
Henz argues that experiences across physical and virtual environments may influence one another. An avatar’s appearance, the treatment it receives, and the roles a user adopts could affect self-understanding and behavior beyond a particular session. These are proposed effects, not inevitable outcomes. His discussion of “cocooning” adds an important qualification. Being physically alone does not necessarily mean feeling lonely. Virtual interaction may restore social contact, even as it substitutes for some physical experiences.
The compliance implication is not to diagnose employees through their platform usage. It is to examine whether the company’s environment supports inclusion, respectful conduct, and access to human assistance. Henz identifies harassment as a concern and discusses safety features that can separate an avatar from surrounding characters. Metaverse. Henz translates that concern into operational questions. Can an employee leave an uncomfortable interaction immediately? Can the employee report it without confronting the other participant? Who receives the report?
Extend conduct expectations to company-sponsored virtual interactions. Establish an investigation process that identifies relevant participants and preserves necessary evidence without indiscriminately recording everyone. Test those procedures before launch. An accessible reporting button means little if nobody is accountable for responding. A different employee representation should not mean a lower standard of corporate conduct.
Humanization of AI: Familiarity Is Not Assurance
Henz distinguishes human-controlled avatars from “Virtual Beings,” or VBs, controlled by AI. He suggests that an appealing representation, responsive behavior, and even a fictional biography could encourage a user to perceive a relationship with software. His virtual dog example makes the issue concrete. A digital companion might offer comfort and facilitate social interaction. Metaverse. Henz: The same companion could also use knowledge about its user to influence behavior, including encouraging longer platform use.
Henz also discusses motivated reasoning: a person’s desire for a relationship may affect what that person accepts as real. For compliance, the issue is not whether a digital character seems friendly. It is whether the organization encourages users to place inappropriate trust in it.
Consider a proposed virtual compliance assistant. A supportive personality might make it easier to ask questions. It should not obscure whether the assistant is authorized to interpret policy, receive confidential allegations, or approve an exception. Make its artificial nature, limitations, and escalation options clear. Test whether employees understand those distinctions, rather than assuming a disclosure statement resolves the problem. A personable interface is a design choice. It is not evidence that the underlying advice is reliable.
Influence: Examine the Incentives Behind the Experience
Henz describes how a virtual platform could capture user inputs, potentially including eye movements through compatible equipment. He warns that an AI-controlled character could use this information to respond persuasively, with an appealing appearance boosting perceived trustworthiness.
Henz further raises the possibility that constant, apparently unconditional attention from a Virtual Being could alter expectations of human relationships. Metaverse. Henz: For a workplace, I would treat that as a reason to preserve human support and challenge, not as a finding that virtual colleagues necessarily undermine empathy or healthy professional relationships.
The corporate application is to examine how data collection shapes behavior. For a proposed platform, ask what information is collected, why it is necessary, and whether it is used to personalize assistance or steer decisions. Ask the vendor what its system is designed to optimize. Time spent on a platform does not necessarily equal the value it delivers to an employee.
Set boundaries before deployment. Identify unacceptable uses of behavioral information, restrict unnecessary collection, and establish review requirements for changes to personalization. This is also a third-party oversight issue. Assign responsibility for reviewing the supplier’s incentives and actual practices, not merely its product demonstration. An ethics review should ask whether the experience helps people make informed choices or makes it harder for them to recognize that they are being influenced.
Offloading: Delegation Requires Defined Authority
Henz’s discussion of “offloading to the Virtual Being” brings the analysis directly into internal controls. He imagines an avatar becoming capable of autonomous activity, such as attending a meeting and summarizing it for its user. He also describes software-generated gestures, including nodding, and connections to calendars and other tools. These examples explain why the opening hypothetical matters. Metaverse. Henz
For a business, observing a meeting, expressing agreement, and authorizing action should be treated as different activities. A system permitted to perform the first should not automatically acquire permission to perform the others. Define the representative’s authority before connecting it to business workflows. Specify what it may access, communicate, recommend, and execute. Reserve designated decisions for explicit human approval.
Keep records that distinguish human instructions from automated actions. Establish a way to revoke permissions and suspend the representative when its behavior departs from its approved purpose. For consequential decisions, require an approval record rather than inferring assent from a gesture, simulated presence, or meeting attendance. Delegating a task should not obscure who remains accountable for the result.
Governance Must Include Testing, Not Merely Approval
Henz concludes by calling for supervisory oversight and continuing study of psychological effects as the technology develops. He emphasizes the opportunity to benefit users alongside the risk of exploiting their vulnerabilities, which suggests a cross-functional review involving compliance, legal, information security, human resources, technology, and the business owner. The precise structure should match the proposed use. Creating another committee does not replace assigning decision-making authority.
Start with a bounded pilot and documented assumptions. Test whether participants recognize AI-controlled characters, understand their authority, and can reach a human when needed. Include both benefits and risks in the assessment. Building on Henz’s discussion of learning applications, a company could pilot an immersive compliance scenario that lets employees practice challenging an inappropriate instruction. Evaluate employees’ choices and the support they need, not merely whether they finish the exercise. Define the conditions for modifying or stopping the pilot. Review incidents, user feedback, and control failures before expanding deployment. The board should receive information about material risks, unresolved limitations, and management’s response, rather than an assurance based solely on participation or enthusiasm.
Practical Takeaways for CCOs and Boards
Start by mapping the experience. Identify who participates, what the system observes, how it may influence behavior, and whether it can act on anyone’s behalf. Give each significant risk an accountable owner. Then test the controls against realistic scenarios. Use a harassment report, an ambiguous AI recommendation, and an unauthorized action to determine whether escalation and intervention actually work.
Finally, require evidence before expansion. Ask whether users understand the technology, whether employees can get human help, and whether management can show that delegated authority stays within approved limits. Henz’s perspective does not supply a finished corporate compliance framework. It supplies questions about human behavior that a technology-only assessment could miss.
The board’s closing question should be straightforward: Can management demonstrate that this experience supports employee judgment without confusing identity, manufacturing trust, or obscuring accountability? That is where the compliance assessment should begin, regardless of what the platform is called.
