The Fourth Industrial Revolution provides companies with new opportunities, and business picks up allies represented by technologies that can change mechanisms of corporate decision making in corporations. Rapid development of technologies, which allows working more efficiently with information, can lead to the creation of a new system of stakeholder interaction, thanks to better analytics, transparency, and speed of decisions. In this regard, the analyst based on big data with the use of artificial intelligence (AI) is able to significantly affect the quality of decisions. How can the application of AI for analysis of big data be able to influence the decision-making process and to what extent can it influence the system of corporate relationships? To answer this question, the authors will try to describe how transformation of decision-making methodology at the Board of Directors level under the influence of the Fourth Industrial Revolution and the development of AI technologies and big data, and what are the opportunities, limitations, and risks of the decision-making process with AI.
TopIntroduction
In today’s corporate world, the speed of change is increasing rapidly and the length of a business cycle, from initial idea to profit gain, has shrunk from several years to a couple of months. Taking all this into account, businesses have to incorporate principles of quick, flexible and intellectual enterprise. This type of development should be founded in intellectual approaches to managing the most vital resource of the 21st century – information. The size and complexity of information, however, becomes both an opportunity and a big challenge. That’s why classic algorithms aren't coping with Big Data, and that’s why machine learning and artificial intelligence (AI) technologies are rising to the top of the agenda.
The digital economy and corporate transformation put pressure on existing mechanisms and management systems. Pressure from stakeholders, along with increasing competition, are accelerating challenges at the level of the Board of Directors – a corporate governance body instituted mainly to represent the interests of financial investors and formed for the most part by the principle of representation. In this new environment, the Board of Directors will have to transform as well; reorganizing the principles and approach to how it functions. If it doesn't do this, top management could become the weak link in the chain of business relations, due to an inability to bear the increased load of information.
As a result, companies have started to pay more attention to new technologies that allow them to process more and more information in an efficient and independent way, to avoid the phenomena of “group thinking” and “following the leader”. Among these technologies, the one that stands out the most is AI-based big data analysis, which could become an effective tool for Boards of Directors in the corporate decision-making process.
Alongside this, it is necessary to manage significant unpredictable risks that arise in the application of such technology. For corporate governance, this can mean the loss of human control over algorithms during the corporate decision-making process, excess confidence in recommendations developed by AI, and dilution of the decision-making responsibility.
This begs the question: what are the conditions for the efficient implementation of AI-based big data analysis in making effective corporate governance decisions? The main goal of this research is to find the best approach to the big dilemma of the nearing future: what is the optimal structure and process for making decisions in the “new digital era” of AI-based big data analysis being used by Boards of Directors?
The need and high demand for such research has been proven by the rising interest of regulators and large corporations in IT governance issues and the use of new informational technologies and cybersecurity at the level of the Board of Directors. We can see more and more Corporate Governance Codes, regarding IT governance, cybersecurity issues and requirements for more IT expertise at the Board of Directors level (Singapore (2012), South Africa (2016), Netherlands (2016), Hong Kong (2016). One of the key issues in the discussion of IT governance is the role of the Board of Directors in controlling key technologies used by a company.
· What is the role of the Board of Directors and what are the specifics of decisions made by the Board of Directors in the “new digital era”?
· How different are the human-based and AI-based decision-making processes, what are the conditions for effective decision-making models?
· What are the applicable risks associated with AI technologies for new corporate governance technologies based on AI and big data are there? How will the fundamental “prisoner's dilemma” applied to competition based on AI be solved?
In this chapter, we are not trying to give the “final answers” to these complicated issues, but rather to set the right questions, which could become a guide to further research and practical experiments.