Entering the risk management rabbit hole at the start of the 2008 financial crisis provided Alec Crawford, Founder and CEO of Artificial Intelligence Risk, Inc., with a decade of education in a single year.
He learned that managing risk is a blend of quantitative modeling and common sense, a philosophy he now applies to the "Wild West" of corporate AI adoption.
In this episode of Evolving Industry, Alec explains why treating AI as a “free-for-all” is a billion-dollar mistake and how proper governance actually serves as an accelerant for business goals.
Alec talked with us about:
In the early days of data breaches, some CEOs viewed fines as a minor cost of doing business.
Alec warned that this mentality is dead in the age of AI as modern regulations, particularly in Europe, have shifted from flat fees.
“ They're not Dollar fines. They're not Euro fines. They're a percentage of revenue fines,” he said.
Using Amazon’s near billion-dollar GDPR penalty as a benchmark, Alec pointed out that it is now “10 to 100x cheaper to prepare” than to face the legal and financial consequences of a violation.
“You can’t play that game anymore,” he noted, especially as regulators like the SEC move from educational leniency to strict enforcement via deficiency letters and seven-figure fines. “ We're not talking like, ‘Oh, we got fined $10,000.’ This is real money.”
Beyond the immediate financial hit, there is a reputational risk that can be far more damaging than any regulatory check.
Alec stressed that if you wait to roll out a secure AI strategy across your firm, it may already be too late.
“You're not one year behind your competitors. You're three years behind because the pace of AI [is] super, super fast.”
This extreme pace of development is why many organizations have treated compliance as an afterthought, essentially leaving their IP’s front doors unlocked.
A common failure in AI adoption is the “failure of imagination,” or simply giving employees a chatbot without specific, safe use cases.
Alec argued that governance shouldn’t be viewed as a roadblock but the layer that makes AI useful by ensuring “permission awareness.”
Without this layer, companies risk immediate shutdowns by Legal or HR.
Alec shared a real-world example where an unmanaged AI allowed an employee to access their leadership's HR data within hours of launch.
“The first day, someone [asked], ‘How much money does my boss make?’ [They] found out the correct numbers for not only his boss, but the entire management team,” Alec explained. “Within seven hours, the legal department had shut down that AI effort. That is a failure of governance.”
By automating common language frameworks, companies can enable their teams to move faster with the confidence that they aren't ingesting faulty data or leaking sensitive credentials.
The true winners in the AI arms race will be the companies that maintain control over their unique data rather than letting third-party providers own their analysis.
“They're going to take my data, which they now own, and they're going to do stuff with it,” Alec said when discussing the outsourcing issue. “They're going to send me back [their] analysis using AI, which may or may not be useful [or] correct, but the problem is they own my data. And now, effectively, they're going to try to sell it back to me.”
Maintaining this “moat” requires a shift in philosophy.
Alec suggested that AI doesn't need “perfect” data to be useful, as it is capable of collating unstructured information from various sources.
“Remember, a human is looking at this and will know, ‘Oh, that's not the data of the last meeting. I guess I forgot to put the notes in,’” he said. “So it's going to do the best it can. The data doesn't need to be perfect for AI to do a really, really good job.”
However, if your competitors are using the same tools on the same data before you’ve even addressed the elephant in the room, then your competitive advantage disappears.
“The differentiator between winners and losers in AI over the next few years: Do you have your own proprietary data that other people do not have?” Alec suggested. “Because if other people have your data, then it's not that valuable anymore.”
Craving more? You can find this interview and many more by subscribing to Evolving Industry on Apple Podcasts, on Spotify, or here.
Craving more? You can find this interview and many more by subscribing to Evolving Industry on Apple Podcasts, on Spotify, or here.