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- Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
- To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value (IBM IBV) is releasing a series of targeted, research-backed guides to generative AI on topics from data security to tech investment strategy to customer experience.
- This is part 19: Risk management.
Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value (IBM IBV) is releasing a series of targeted, research-backed guides to generative AI on topics from data security to tech investment strategy to customer experience.
This is part 19: Risk management.
Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value (IBM IBV) is releasing a series of targeted, research-backed guides to generative AI on topics from data security to tech investment strategy to customer experience.
This is part 19: Risk management.
Treacherous terrain around every bend
When it comes to risk, generative AI is like a master cartographer, mapping the landscape as rapidly as disruption reshapes it. This makes it possible to see new risks clearly as they emerge—from climate catastrophes to AI-driven ethical dilemmas —all while keeping traditional risks in clear focus.
Gen AI helps identify patterns that could be symptoms of larger problems under the surface. It can simulate “what-if” scenarios that help teams prepare for the unknown and generate recommendations on what to do next. Given these capabilities, 55% of CEOs see gen AI as more of an opportunity than a risk.
But 45% say the risk is greater than the opportunity. While gen AI can be a powerful tool to expand risk management capabilities, it also expands the breadth and depth of risks that have to be managed. Gen AI is a disrupter in its own right, creating new fault lines and vulnerabilities, such as complex scams.
The sheer scale and speed of gen AI-driven data analysis often creates blind spots, obscuring critical risks from view while creating new risks, including deepfakes of images, documents, and voices. Relying too heavily on gen AI outputs can create a false sense of security at a time when teams need increasing vigilance. Inaccurate assessments, the cost of computing resources, expanded security vulnerabilities, and improper use of data are just a few of the additional risks that could push an organization off track and out of compliance.
CEOs must learn to navigate both sides of gen AI risk and chart a deliberate course forward that integrates AI-driven risk management with human judgment, oversight, and regulatory compliance. Organizations that strike the right balance will be able to efficiently respond to rapidly evolving threats with greater speed and better response, forging a more resilient future. Those that are too aggressive with their gen AI adoption—or too risk-averse—may face unforeseen consequences and competitive displacement.
The IBM Institute for Business Value research has identified three things every leader needs to know:
1. Generative AI is unleashing a maelstrom of risks.
2. Your reputation is on the line.
3. The future is a threat multiplier.
And three things every leader needs to do right now:
1. Set a risk threshold that fuels innovation—not chaos.
2. Cool simmering reputational risks before they boil over.
3. Prepare for 100-year risks every week.
Additional content
Meet the authors
Anthony Marshall, Senior Research Director, Thought Leadership, IBM Institute for Business ValueCindy Anderson, Global Executive for Engagement and Eminence, IBM Institute for Business Value
Christian Bieck, Europe Leader & Global Research Leader, Insurance, IBM Institute for Business Value
Spencer Lin, Global CFO Research Lead, IBM Institute for Business Value
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Originally published 12 August 2024
1. Innovation
+ Generative AI
What you need to know
Generative AI is unleashing a maelstrom of risks
Risk is the currency of innovation—but uncontrolled risks pose an existential threat to the enterprise. To cash in on the promise of gen AI-powered transformation, CEOs must ensure added risks don’t overshadow potential rewards.
Gen AI continues to bring new threats to the fore, with 44% of CEOs saying it creates significant risks for society. And 57% of chief risk officers (CROs) and chief financial officers (CFOs) say their organization’s use of gen AI will increase overall risk exposure. Top risks they consider when making gen AI investments include compliance and regulatory risk (63%), customer and employee privacy (58%), and bias and misinformation in decision-making (56%). More than half of executives are concerned about the cost of computing resources and new cybersecurity threats.

60% of CEOs say they’re looking into mandating additional gen AI guardrails to mitigate risk. But many are still being pushed to the sidelines. Consider regulatory and compliance risk. Even though 63% of CROs and CFOs say they’re focused on these risks, only 29% say they’ve been sufficiently addressed. And 68% of CROs and CFOs say they’re insufficiently prepared to tackle gen AI-related risks overall.
The situation is further complicated by a lack of skills. 70% of CROs and CFOs say keeping up with the speed of gen AI development and continuously addressing new risks requires expertise they currently lack. And 60% of CROs and CFOs say their current approach is ad-hoc, only for select processes—or simply non-existent to manage the risks of gen AI.
What you need to do
Set a risk threshold that fuels innovation—not chaos
Understand the full spectrum of risks gen AI introduces and their impact on your existing risk profile, then explicitly define how much risk you’re willing to accept to move the needle. Ask your CRO to keep you in the Goldilocks zone—not too aggressive, not too risk-averse—and give your teams the “just right” gen AI tools they need to outmaneuver even the most unpredictable threats.
- Define risk appetite for the full scope of gen AI risks. Work with your CRO to evaluate how successful the organization has been with managing risk in the past, its financial capacity to withstand losses, and the potential impact of risk on operations. Outline the acceptable, quantifiable level of risk for each category. Establish risk limits.
- Take a holistic approach to managing gen AI risks. Set up formal risk assessments for gen AI initiatives. Work with your CRO to establish AI governance with clear accountability that is appropriate within your organization structure. Provide guidance on mitigation strategies to address identified risks and vulnerabilities.
- Establish mechanisms for ongoing monitoring and oversight of gen AI risks. Look to AI leaders to monitor gen AI deployments, conduct risk assessments, and report to executive leadership. Use AI assistants to curate risk data for review by AI leaders. Foster open communication and collaboration with stakeholders.
2. Brand
+ Generative AI
What you need to know
Your reputation is on the line
One misstep can undo years of successful brand building, causing irreparable damage to an organization’s reputation—and its bottom line.
But many leaders continue to roll the dice. 84% of CROs and CFOs say reputational risk needs greater visibility at the board level. And fewer than half say their organizations have developed mitigation strategies for sources of reputational risk, including environmental and social responsibility, unsafe work environments, and security failures. Only 40% have a strategy in place to deal with compliance shortcomings.
When left unchecked, reputational risks of any type can lead to financial disaster. For instance, 39 banks lost more than 130 billion in shareholder value due to reputational risk in 2023. Safety incidents, service meltdowns, and cyber outages in the travel industry have led to lost sales and market capitalization in the last year, as well.

Reputational risks also present opportunities, as managing them effectively can yield substantial returns. Organizations with reputational risk protection strategies have seen their stock prices rise 5% above the market within two weeks of a reputational challenge. And those that communicate their strategy effectively see this premium rise to 9%.
Generative AI could either multiply or mitigate reputational risks, depending on how it’s managed. If gen AI deployment isn’t carefully governed, concerns about ethics and bias could pose a risk to a company’s reputation. However, when adopted properly, gen AI can help CEOs manage the reputational risks that threaten the organization’s long-term viability.
For instance, it helps teams identify potential risks before they escalate, monitor social media and online sentiment in real-time, and develop targeted communications strategies to address challenges. While only 16% of organizations use gen AI to address reputational risks today, 64% plan to capitalize on these capabilities by 2027 to predict, monitor, and mitigate potential issues that could affect their reputations.
What you need to do
Cool simmering reputational risks before they boil over
Maintain credibility with stakeholders by monitoring and responding to reputational risks as they emerge with gen AI. Predict which risks are most likely to escalate and suggest proactive mitigation strategies to keep the lid on heated situations.
- Gain insights into public perception and unseen risks. Use gen AI to analyze social media, news articles, and customer reviews to identify emerging trends and conversations related to the organization. See what’s behind negative sentiment and have your CMO and legal team develop a reputational risk mitigation strategy. Be responsive to maintain a positive brand image and reputation.
- Address environmental and social responsibility issues before they create a crisis. Tap gen AI to assess datasets related to supply chain operations and environmental factors, including supplier performance data, transportation logs, weather patterns, and environmental and labor regulations.
- Show your true colors. Build personas and use AI assistants to create and curate content that showcases your position on various issues. Pre-emptively test how different responses will resonate with each stakeholder group. Maintain consistent messaging and tone for social media, marketing materials, press releases, crisis communications, and customer interactions.
3. Disruption
+ Generative AI
What you need to know
The future is a threat multiplier
From geopolitical disruption to data privacy compliance to generative AI-fueled cyberattacks, organizations face myriad risks that could become firestorms in a flash. That’s why leaders need to be proactive, deflecting threats before they’re in striking range.
In fact, 80% of CROs and CFOs say their organizations need to move from defensive risk management to a forward-looking risk stance. And many already believe that gen AI’s predictive capabilities can help them play better offense. Nearly half of CROs and CFOs say forward-looking risk management will be the primary objective of their gen AI investments in risk management by 2027.

When used proactively and predictively, gen AI can unlock a treasure trove of benefits. CROs and CFOs say improving risk prioritization (76%) and improving tracking of potential risks (74%) are the most important benefits that come from adopting gen AI for risk management. These executives also expect gen AI to reduce the time it takes to assess regulatory changes (73%), shorten the time it takes the organization to respond to emerging risks (70%), and increase accuracy in risk forecasting (69%).
Gen AI can also improve an organization’s market position, with 67% of CROs and CFOs saying they need to quickly adopt it for risk management to keep up with competitors. Yet, the risk function has been one of the slowest to adopt gen AI, ranking 12th out of 13 functions. The clock is ticking—and organizations that don’t pick up the pace may soon find themselves under siege.
What you need to do
Prepare for 100-year risks every week
Use gen AI to stress-test your strategy and build resilience into your operations. Give risk managers the operational visibility they need to protect value and transform potential threats into opportunities.
- Dial in your risk radar. Use gen AI to decode ambiguous data, interact with complex network graphs, and call attention to noteworthy anomalies. Illuminate risks that may be hidden due to complex interdependencies, emerging threats, and subtle pattern shifts.
- Preempt devastation. Introduce predictive analytics digital assistants to identify unlikely but severe risks, helping risk managers quickly and efficiently take proactive measures to respond to a wider variety of threats.
- Continuously re-calibrate. Encourage the risk function to monitor data streams and adjust risk forecasts in real-time. Generate synthetic data to simulate potential risk scenarios. Accelerate the cycle of risk identification and assessment with gen AI suggesting new mitigation strategies as the threat landscape evolves.
The statistics informing the insights in this report are sourced from two proprietary surveys conducted by the IBM Institute for Business Value in collaboration with Oxford Economics. The first asked 200 US-based Chief Risk Officers and Chief Financial Officers about their perspectives on generative AI and the risk in May and June 2024. The second asked 5,000 global executives about their perspectives on generative AI more broadly in January to March 2024. Additional references include Steel City Re and CNN.
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Additional content
Meet the authors
Anthony Marshall, Senior Research Director, Thought Leadership, IBM Institute for Business ValueCindy Anderson, Global Executive for Engagement and Eminence, IBM Institute for Business Value
Christian Bieck, Europe Leader & Global Research Leader, Insurance, IBM Institute for Business Value
Spencer Lin, Global CFO Research Lead, IBM Institute for Business Value
Download report translations
Originally published 12 August 2024
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