AI—use, risks and ethics in annual reporting

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Artificial intelligence (AI) continues to dominate the headlines as the race to advance and embed its use across all areas of business pushes on. However, as the use of and investment in AI advances, questions about associated ethics and risks persist. This Market Insights report examines recent company reporting on AI use, risk and ethics. The report analyses the 62 annual reports published by FTSE 350 companies between 1 January 2023 to 16 May 2023 that reference AI specifically. It also features expert commentary from Tara Waters (Partner and Chief Digital Officer, Ashurst LLP) and Di Yu (Partner, White & Case) on how companies are likely to report on AI in the future.

Key findings:

• the rate of use reporting in companies mentioning AI was found to be significantly higher than that of risk reporting. Of those mentioning AI, 52 companies reported their use of AI (84%), three companies reported on the risks of AI (5%), while seven reported on both their use of and the risks associated with AI (11%)
• Financial Services companies emerged as the frontrunners in embracing AI technology, surpassing other industries in reporting on its implementation and integration while, remarkably, only one Technology company mentioned AI
• companies are beginning to develop their own codes of ethics regarding AI use, with expert market commentary indicating that such principles of ethics are likely to be developed further through policies and governance. Transparency and clarity will be key when companies disclose the extent and nature of their AI use