A Governance Strategy Is the Best Path to Head Off Digital Risk

Technology is experiencing a reputation crisis. There’s fear over artificial intelligence. Mistrust in blockchain and cryptocurrency. Regulatory crackdowns on social media.

Meanwhile, technology acceleration—in areas such as AI, blockchain, and the metaverse—is barreling forward at a pace that neither regulation, commerce, ethics, data protection, business functions or culture can quite match. This unprecedented pace and prevalence of digital change across industries, geographies, and disciplines leaves an acute sense of uncertainty.

When innovation arrives before the rules or best practices, fear and mistrust are natural responses. And the consequences can be dire. Since the industrial revolution all the way to the birth of the modern internet, society has grappled with technology’s impact on business, social norms, jobs, and the economy.

It’s happening again now, and in a heightened way. Take for example the massive breakdowns in nascent industries like the digital assets space, and the outcry from technology industry visionaries about the implications of unchecked generative AI.

While technological advancement is fueling significant, rapid change, it’s actually not the culprit. Rather, these problems have resulted from failures to embed governance and risk mitigation into the foundation of new innovations and business models. The result has been a flurry of organizations and industries operating unrestrained, taking the lack of regulatory guidance or standardization as permission to push the limits past known governance best practices.

Therein lies the crux of the issue. Because even in the absence of a legal, regulatory, or industry requirement, entrepreneurs and business leaders have a responsibility to uphold key principles and set a tone for what’s acceptable and what isn’t. In any setting of technology advancement, while the innovation may be new, the fundamentals of regulatory frameworks and governance strategies aren’t.

Established principles can and should be applied across new avenues of AI, digital assets, data mining, and other ground-breaking advancements. The only substantial difference now is that these fundamentals must be applied faster and to a wider landscape of technologies than in the past.

Without strong governance as a foundation underpinning new technologies as they are introduced and implemented, confidence will erode. Consider the AI hype cycle, which has doubled back and doubled down amid the release of generative AI applications into the mainstream.

These models and their underlying systems consume and process large quantities of data, which may be inaccurate, biased, inadequately governed, used without consent, or contain sensitive information like intellectual property or personal data.

Even as ethics, data provenance, intellectual property controls, and digital risk management have been key conversation points in this ecosystem, they have largely not been embedded into the technology as a means to inherently avoid harm.

As AI becomes more prevalent, it will likely require collaborative global oversight from the G20 and across industries. A collective effort of establishing an agreed-upon framework for the rules of the game will be needed to allow progress to continue alongside guardrails that help contain the risks before they come to fruition.

Being passive, and simply waiting for the issues to arise before addressing them, will only undermine the technology’s impact. Thought and action now will be integral to fostering or rebuilding trust and confidence among industries, governments, and individuals. The success of advanced technologies like digital assets and AI hang in the balance.

This is the closest our society has been in a long time to potentially futuristic disruption. Even if the most hyperbolic projections don’t transpire, we still face a significant wave of change both at work and home.

Business leaders today have the privilege and responsibility of participating during this pivotal period. With that, there must be a shift away from the view that governance is an inconvenient cost of doing business. Rather, governance, especially in the context of technological advancement, should be seen as an enabler.

Governance structures at all levels, from global collaboration to federal, regional, industry, and company action will allow for an ecosystem where technology acts in concert with society, while avoiding or at least significantly minimizing disruption and harm. Leaders and boards must set a strong tone of governance and take a firm position on ensuring their organizations and industries act accordingly.

Change at this scale can be scary, and risky for business. Consider the shifts that happened during the industrial revolution and the dawn of the internet. People were naturally afraid of what would be lost when old ways of doing things were left behind. It’s true that some things were lost. So much was gained, though, in terms of efficiency, quality of life, innovation, individual opportunity, and economic growth.

That will happen again, but faster now. Many different jobs, industries, and functions will grapple with this present phase of evolution. The very fact of grappling with these changes is positive, though. It’s a first step, and if taken collaboratively, can lead to an ecosystem and culture of engagement and responsibility, so that as governments work on these issues from the top down, businesses can meet them from the bottom up.

The imperative for business leaders, and really for anyone in the technology industry, is to learn from past examples and apply the best principles to new challenges in this period of transition. They should be shape shifters for technology’s future, so that while working to advance this world through technology, it’s also left in a better place—socially and economically, for generations ahead.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Sophie Ross, the global CEO of technology at FTI Consulting, has more than 20 years of experience in company management and operations in the US, Europe and Asia, with a focus on digital insights and risk management.

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