LexisNexis Market Tracker Trend Report: AI—use, risks and ethics in annual reporting

Di Yu, a partner in our Corporate M&A team, is delighted to feature in the LexisNexis Market Tracker Trend Report on AI – use, risks and ethics in annual reporting. The report looks at recent company reporting on AI use, risk and ethics.

The report analyses the 62 annual reports published by FTSE 350 companies between 1 January 2023 to 16 May 2023 that reference AI specifically.

Key findings include:

• The rate of use reporting in companies mentioning AI was found to be significantly higher than that of risk reporting. Of those mentioning AI, 52 companies reported their use of AI (84%), three companies reported on the risks of AI (5%), while seven reported on both their use of and the risks associated with AI (11%).
• Financial Services companies emerged as the frontrunners in embracing AI technology, surpassing other industries in reporting on its implementation and integration while, remarkably, only one Technology company mentioned AI.
• Companies are beginning to develop their own codes of ethics regarding AI use, with expert market commentary indicating that such principles of ethics are likely to be developed further through policies and governance. Transparency and clarity will be key when companies disclose the extent and nature of their AI use.

Di Yu, M&A Partner, says: "As companies increase their use of AI, the next "big thing" will be the development of "corporate digital responsibility" principles. We are already seeing companies that rely heavily on AI (and in particular algorithmic decision-making) pay increasing attention to transparency of disclosures as regards their AI use, including as part of annual reporting. This will only increase, as AI use becomes more widely adopted. That is in turn likely to attract regulatory scrutiny, especially from regulators viewing this as part of the wider ESG agenda. Key themes that one can expect from regulators include ensuring disclosures on the extent and nature of AI use are clear and sufficient, any claims as to the capabilities of AI are properly substantiated and the risks and limits of the underlying technology are identified and disclosed."

The article is reproduced with permission from LexisNexis Market. 

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