Take a scenario where you are using AI to write your marketing emails, answer your customer queries or to even screen the job applications that you have received or to make Product recommendations to your customers. And then you discover that the new regulation requires you to explain how these AI decisions are made. This is becoming a quirky reality in businesses around the world. 

AI adoption has accelerated to a huge amount in the businesses and hence the AI regulations are also catching up. Transparency is not just a legal business expectation, it is a rising need.

Why Governments are regulating AI

 AI adoption has exploded not just in the chat box but it is also used to generate content, to hire, it is widely used in the banking industries, the healthcare and the customer support industries as well. Constant use of AI has brought a lot of risk in the business world. The risk of biases, privacy breach, even deep fakes and hallucinations are all a deadly reality now. This has led to a huge amount of loss of customer trust. AI limits your decision making, it makes it more opaque and hence governments are not trying to stop AI but are trying to make AI safer, fairer and more accountable. 

What is AI transparency?

AI transparency in the business world means that the business should be open about where it uses AI, when the customers are not interacting with humans but with AI, and what data AI uses. Instead of pretending that the chatbot is a human the companies should disclose that customers are interacting with AI so that their trust is maintained. 

If businesses are using AI to make decisions, then it should explain how these decisions are made. We do agree that AI definitely reduces the errors caused by human oversight, but there are limitations of AI and it should always be disclosed when AI is being used so that the trust between the customer and the business is maintained throughout. 

The EU AI Act

The EU AI Act is the world’s first law on artificial intelligence. It is establishing a risk based system that would sort AI applications into four different departments, one being the unacceptable risk, second being high risk, third being limited risk and the fourth being minimal risk. 

As these 4 categories suggest, the unacceptable risk would be completely banned. Now these types of risk may involve identifying real time biometric in public spaces or having some behavioural cognitive manipulation happening while the apps are being used. 

High-risk apps are heavily regulated and may cover critical infrastructure records and medical as well educational records. These require strict technical documentation, risk assessment and only then can they be used as per the EU AI Act. 

Limited risk also requires transparency, so generative AI and chat boards must clearly disclose to the users when they are interacting with an AI system. And the last one is minimal risk, but there is no restriction here. So most of your everyday applications may filter spams or the basic video game would face no mandatory requirements.

This law applies to any company outside the EU if their AI output or the system is used within the European Union. 

 AI Transparency Is Affecting All Arenas

AI transparency is not just linked to tech companies, but it is now spreading to all the areas. The marketing arena, for example, the blogs are now AI-generated, e-mail campaigns are AI-generated, even the personalization is AI generated because of all the information that the AI keeps on getting on a regular basis. Something as simple as image generation or advertising is also AI generated.

So businesses must ask themselves this question first. Should customers know the content was AI assisted? And how do amongst all this AI-craze do brands maintain authenticity?

Customer support includes use of chatbots and virtual assistants and AI ticket routing. Thus they need to give customers the disclosure as to this AI being used in customer support industries. HR industries are also using AI to get the resume screened, analyse the interviews and even evaluate performances of employees. This may lead to potential bias and there might be a need for human review because AI lacks the emotional human touch.

Finance industries too use AI to get loans approved, help in fraud detection, check the credit scoring. Hence, explaining to customers regarding this explainability is critical. Healthcare sectors use AI to get diagnostic support, help with patient communication and medical recommendations. Here too human oversight is essential, yet it needs to be disclosed that AI has been used to help the cause. 

Why AI Transparency Builds Customer Trust 

Customers value honesty and hence transparency increases their confidence in your business. By doing this, businesses gain higher credibility and a strong brand reputation and get to build a better customer relationship. If you look at it from a bigger picture, it reduces the legal risk, gives you a competitive advantage, and it shows that transparency is not slowing innovation, but it is making innovation sustainable. 

Responsible AI is Becoming a Competitive Advantage 

Everybody uses AI, but the main idea is to use AI responsibly. The principle of fairness, privacy, security, all of these are quite necessary when you want to use AI responsibly. Companies should ensure they use AI only to oversee the things that become difficult due to human oversight, to test biases and and if they are using air regularly, then they need to do regular audits for the ethical deployment. Responsible AI helps companies to avoid reputational damage before it even begins happening. 

How Businesses Can Prepare for AI Compliance 

Businesses need to conduct regular audits to see where AI is currently used. It can be anywhere in marketing, sales or in customer services, maybe even in recruitment departments or operations. They must create AI usage policies. These are the internal guidelines that help the company to use AI responsibly. Training your employees for the same and even setting some approval processes for using AI is a must. 

Businesses must inform customers and provide disclosure notices where AI is being used. They must keep on updating their privacy policies regularly based on their AI usage and the chatbot labels also should come with the information that this is being recorded by AI. It is very much recommended to take consent from the customers, wherever necessary, before involving AI in the process of interacting with customers.

Businesses must keep humans involved so that they can review AI outputs. AI outputs are not always accurate and correct and hence keeping humans involved is a good decision. Humans can also see if there are any decision oversights made by AI and can help to control the damage before it happens. Businesses should also monitor regulations that are being set by different countries as they may introduce different laws. It is necessary to know that compliance is an ongoing process, not a one time thing. 

Future of Business is AI Transparency 

Businesses must be ready when customers ask if this was written by AI or who made this decision and what was the data I provided used for. They must be prepared with transparent answers that will help them to earn the customer trust and loyalty.

As we all know AI is transforming the way in which the world, the business and everything else around us works. Even the regulations are evolving and the customer expectations are rising, so companies must embrace usage of AI responsibly so that they can be better positioned to innovate tomorrow. The future is not using AI less, but it is all about using AI more openly, ethically and responsibly.