The Risks of Using AI in TPRM (and How to Mitigate Them)

AI-Powered Third-Party Risk ManagementArtificial intelligence (AI) has the potential to revolutionize the practice of third-party risk management. However, third-party risk managers should understand AI’s current limitations and risks – and have a mitigation strategy ready. Below are five risks and mitigations that you should consider as your organization evaluates how AI can support your TPRM program.

1. Data Quality and Bias Risks

AI models heavily rely on data quality and accuracy. Poor data quality can lead to erroneous risk assessments, while biased data can perpetuate unfair treatment of suppliers or third parties.

To mitigate this risk, implement robust data governance practices, including data validation, cleansing and enrichment. Continuously monitor and audit data to ensure its accuracy and completeness. Finally, employ diverse and representative data sets to address bias in AI models.

2. Lack of Transparency and Comprehension

AI models can be highly complex and difficult to interpret. Lack of transparency and comprehension can raise concerns about the validity of third-party risk assessments and decision-making processes.

To overcome this, use AI algorithms and models that offer interpretations and explanations. Choose AI tools that provide insights into how the model arrived at specific risk scores or predictions. Using transparent AI systems will help you to build trust with stakeholders and enhance regulatory compliance.

3. Cybersecurity and Data Privacy Risks

AI systems that handle sensitive risk and supplier data become attractive targets for cyber-attacks and data breaches. To mitigate cyber and data privacy concerns:

• Implement robust cybersecurity measures, including encryption, access controls, and regular security audits
• Conduct privacy impact assessments to identify and address potential data privacy risks
• Validate controls against commonly used cybersecurity frameworks such as NIST, ISO, SOC 2 or CIS
• Use the frameworks to comply with relevant data protection regulations for safeguarding sensitive information

To ensure your usage does not infringe on your customer’s rights, be sure to engage your organization’s legal and compliance teams, as well as external auditors, prior to evaluating AI technologies.