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Hi, enjoy this weeks curated risk and business updates.

We are rounding out our list of 15 key technology trends for 2024, with  the final five trends we will focus on in 2024. Going forward, our news coverage and editorial discussions will provide increased focus on key technology trends that all organizations need to consider in identifying emerging risks and trends.

Artificial Intelligence (AI) continues to revolutionize industries, offering unprecedented insights and efficiency gains. Challenges are significant - for example, 75% of consumers are concerned about misinformation from AI. However, managing AI risks, such as bias and data privacy, remains paramount for businesses adopting these technologies.This adds complexity to the spectrum of risks, requiring companies to carefully balance the potential benefits of AI with its inherent challenges.

Efficiency in technology, particularly in cost and energy consumption, is crucial for sustainable operations. Implementing green IT practices, like cloud computing and energy-efficient hardware, can reduce environmental impact while enhancing operational efficiency. Companies are quickly realizing that Cloud computing and AI costs need to be closely managed, leading to cost monitoring tools and refining cloud and AI strategies. This shift toward more efficient technologies alters the risk landscape, with companies needing to consider not just financial and operational risks but also environmental and regulatory risks.

Blockchain technology provides secure, decentralized data storage and transaction capabilities, but its widespread adoption faces challenges such as scalability and regulatory uncertainty. Businesses must carefully assess the risks and benefits before integrating blockchain into their operations. This introduces a new dimension of risk related to the adoption of emerging technologies and regulatory compliance.

Biometrics offer enhanced security and convenience, but privacy concerns and data breaches underscore the importance of robust data protection measures. Enterprises must prioritize data security and compliance with privacy regulations when implementing biometric authentication systems. This raises the stakes in terms of cybersecurity and data privacy, requiring companies to invest in strong security measures and privacy practices.

Edge computing and the convergence of 5G and IoT promise to revolutionize data processing and connectivity, enabling real-time analytics and responsive systems. However, ensuring the security and reliability of edge devices and networks is essential for maximizing the potential of these technologies. This expands the risk landscape to include considerations of network security, data integrity, and operational resilience.

In conclusion, while these technologies offer tremendous opportunities for innovation and growth, businesses must also address the associated risks to ensure successful implementation and long-term sustainability.

Request more information on DelCreo’s Risk Universe and risk assessment services.

As a reminder, here are our Risk Universe categories that we leverage to tackle and understand risk which include:

• External Risk

• Governance Risk

• Strategic Risk

• Product Risk

• Business Operations Risk

• Legal & Compliance Risk

• Financial Risk

• Technology Risk

These high-level risks are fairly consistent between different companies and risk profiles.

We leverage our understanding of risk maps and risk universes to better advise our clients in strategic business decisions and to optimize the management of risk throughout the enterprise.

Weighing the Risks

Weekly Highlights

• The AI boom, akin to the dotcom era, could face a market correction, highlighting the need for careful risk management and strategic planning in adopting AI technologies.

• Businesses should adopt a cautious approach to AI investments, focusing on robust risk management practices and sustainable growth strategies.

• The downturn in the U.S. agriculture economy could increase credit risk for banks, impacting their ability to lend and potentially leading to loan losses.

• Banks should closely monitor their exposure to the agriculture sector and implement risk mitigation strategies to navigate potential challenges.

Risk Universe Weekly Updates

External Risk

• CRE and systemic risk

  • The commercial property market's slide in office valuations could lead to challenges for smaller regional banks, potentially impacting credit tightening in commercial property markets. However, larger banks and non-bank lenders hold the majority of loans, mitigating the direct impact on the broader US economy

  • Non-banks and investment funds, which hold a significant amount of CRE debt along with other types of loans, could pose a risk to the financial system, especially if stress feeds back into the banking system through increased lending from banks to non-banks since the financial crisis

Governance Risk

• Amazon stops employees from using generative AI tools like ChatGPT

  • Amazon issued a cautionary notice to employees against using third-party generative AI tools like ChatGPT for work-related purposes, emphasizing the importance of avoiding such tools for confidential Amazon work.

  • The company's internal policy highlights potential risks associated with third-party generative AI tools, including ownership or licensing rights over content inputted by employees, aligning with similar measures taken by others like Samsung and Apple to restrict the use of such tools internally.

Strategic Risk

• Enterprises face problems integrating AI

  • Many enterprises are facing challenges integrating AI into their tech stack, with over 90 percent experiencing limitations, leading to issues such as provisioning, on-going management, lack of implementation frameworks, and change management problems.

  • There's a disconnect between executives and practitioners regarding AI implementation strategies, with executives focusing on building strong integrations between internal SaaS apps and AI, while some practitioners report a lack of an AI strategy. This highlights the need for enterprises to unify their teams and manage AI functionality effectively to avoid overwhelming technical teams and conflicts between connected apps.

Product Risk

• Google CEO Calls AI Chatbot Responses Biased and Unacceptable

  • Google's AI chatbot, Gemini, has faced backlash for producing ahistoric images and controversial responses to philosophical questions, highlighting issues with product design and defects in AI technology and potential reputational damage

  • The controversy around Gemini underscores broader concerns about trust in AI models, particularly in reproducing biases and the challenges of managing AI functionality effectively within a product to avoid unpredictable and undesirable outputs.

Business Operations Risk

• DP World CEO: Supply chains are facing multiple challenges. Trade policies and procedures shouldn’t add to them

  • Global supply chains face increasing fragility due to geopolitical issues, climate instability, and economic challenges, prompting a need for greater regionalization and resilience planning.

  • To address these challenges, businesses and governments should focus on easing trade frictions, supporting a rules-based order, and accelerating digitalization in trade processes to reduce costs, improve efficiency, and ensure sustainability.

Financial Risk

• Deepening downturn in U.S. agriculture economy red flag for banks

  • Weak commodity prices, high interest rates, and inflationary pressures are expected to reduce U.S. farm incomes by 26% in 2024, following a 16% decline in 2023, potentially leading to difficulties for farmers in servicing debts and increased credit risk for banks.

  • The agriculture sector may see delays in investments and spending, impacting rural economies and local businesses, as farmers struggle with lower incomes and higher costs, although the long-term outlook for the agriculture industry remains positive.

Technology Risk

• Dissecting the AI boom through the dotcom lens

  • The current artificial intelligence boom is drawing comparisons to the dotcom bubble, with concerns about potential market exuberance. Despite differences, such as the speed of innovation and the quality of companies leading the AI charge, stark similarities exist.

  • Massive capital expenditures are fueling the AI boom, similar to the investment surge seen during the dotcom era. However, today's AI companies are generally more profitable and have stronger business models compared to many dotcom companies of the past.