Post #69
July 5, 2023
Claire Bodanis
Claire gives an update on her proposal for regulating the use of AI in reporting, and invites all those interested to take part in an hour-long focus group discussing the topic. If you’d like to join what promises to be a lively debate, please email claire@falconwindsor.com.
A lot has happened in the two months since my blog in which I shared my proposal for regulating the use of AI in corporate reporting. As my friends at the FRC commented – ‘you’ve certainly been busy!’
Reporting proposal now with Government
To remind you: in May I drafted a proposal for regulating the use of AI – particularly large language model systems (LLMs) – in reporting, and sent it to the FCA and the FRC. I had a useful discussion with the FRC, who told me that what I should really be doing is responding to the Government consultation on regulating the use of AI – A pro-innovation approach to AI regulation (see callout).
To summarise the general principles of the Government’s approach (although it’s well worth a read):
Their aim is to regulate the use of AI, not AI itself
In this context the Government is looking to empower regulators to take the lead, by setting the framework and principles then asking regulators to look at ‘use cases’ in their own contexts
Specifically on LLMs, the consultation (I’m pleased to say) highlights the key issue of inaccuracy: ‘[LLMs] have limitations, for example, the models are not trained on a sense of truth, so they can reproduce inconsistent or false outputs that seem highly credible. Because they can be adapted to a wide variety of tasks downstream within an AI supply chain, any improvements or defects in a foundation model could quickly affect all adapted products.’
So with that useful prompt from the FRC – who also explained that AI regulation is a matter for Government, and that the FRC itself doesn’t have the powers to take my proposal forward – I had a very encouraging conversation with a sympathetic MP, who felt that my proposal could be a useful example of how regulators could act in line with the Government’s short-term aim of encouraging regulators to look at use cases. I duly sent my original proposal to the Government on 20 June, with some revisions for it to work as a consultation response to their white paper (see PDF link below).
Taking soundings from the corporate reporting community
The next stage – which is where, I hope, you too will come in! – was to convene a series of focus groups, with around five or six people responsible for reporting in each. I’m quite honest about my aim: it’s to pummel and poke holes in my proposal so that I can revise and, ideally, strengthen it. So far I’ve run three, with mostly FTSE100 and FTSE250 companies, and, along with some very supportive comments, much pummelling and hole-poking was achieved.
An excellent suggestion, also relevant to some of you blog readers, was to widen the groups to include more corporate reporters, and to go beyond the corporates to auditors and investors. Setting up the next series of sessions is on my agenda for later this week, and, while I have an initial list, the more the merrier – including inviting my newly acquired friends in the European reporting community, whom I met while chairing the ESG reporting summit in Berlin this June.
So if any of you who work in reporting, or otherwise have an interest, can spare an hour to discuss this issue – please do email me to join the event. Here’s what you need to know:
1hr zoom roundtable(s) of reporting peers; date(s) TBC via Doodle – we want to hear everyone’s views, so these will be small groups of probably 4-5 people. I'll send out a Doodle to ensure the most convenient times, and will email the issues to be discussed.
Confidential – it’ll be Chatham House rules – any comments from the discussion used in subsequent communications will be anonymous, without mentioning personal or company/organisation names, and will be checked with participants before circulation more widely.
I’ve also had some interest from the business press, so I’m hoping that a story on this initiative will come out soon; at least once I’ve collated the first set of responses, to give them a bit more to go on.
Keeping up the momentum with Government
To come back to the Government: I promised my interested MP that I would circulate the output of the focus groups, once approved by the participants (all comments anonymised), and feed that back into their process. Given how fast this agenda is moving, we’ll be writing up and submitting the first set of feedback over the coming week, with more to follow.
I’m sure many of you are wondering what I really expect to come from this. After all, regulation doesn’t usually get made by campaigners like me responding to Government consultations. And you’re right, I don’t necessarily believe that we’ll be seeing my language making its way onto the books any time soon. But whatever the outcome, the issues in question are so critical to the trustworthiness, accuracy and ultimate purpose of reporting, that raising awareness and getting people to discuss them is, I believe, a worthy endeavour in and of itself, and one which I encourage all of you to join. Thank you very much.
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Read Claire’s response to the Government consultation here.
Read Claire’s guidance for Boards and management on the responsible use of AI in reporting here.