Cybersecurity - Looking to the Banks for Guidance

The growing complexity and urgency of cybersecurity is leading to a good deal of strategic thinking in business. Companies are and have been responding as best they can but they are still often searching for direction in the overall strategy for strengthening their security in cyberspace.

Banks have special demands put upon them and have special needs for good cybersecurity, so it makes sense to look to banks for guidance on what direction cybersecurity might or should take.

KPMG did this by discussing the major challenges facing their banking and financial clients in three major areas of the world - Asia, Europe and the US.  The results were published in a white paper on the firm's website.

Some of the major issues raised were:

1. Cybersecurity needs to be seen as a business issue and not just a technology one. Nothing new here, but it seems  business is still struggling with this concept. Some of them are addressing this issue by creating a dedicated cybersecurity organization reporting directly to an Operational Risk group, thus enabling the business to own the issue.
2. As with other industries, banks have experienced increased regulatory requirements, so regulatory risk has continued to grow as an area of concern. since regulatory risk can detract from other more threatening areas of risk, increased regulation carries a risk itself of shifting the cybersecurity actions of companies away from the most serious threats to that of compliance.
3. Banks have been integrating their activities on money laundering and fraud with other cyber controls, raising a prospect of more efficient and hopefully more effective controls.
4. Increased tailored training of business, non financial people on how cybersecurity incidents work - what they look like and what to watch for.

This brief white paper provides some interesting insights into the direction of cybersecurity controls and is worth a read.

Balancing Human and AI Activities

AI and machine learning has been making inroads into many aspects of commerce, with one of the notable areas being retail. Leaders like eBay are using a combination of AI and humans to achieve the best they can in customer service.

In a simplistic sense, AI basically uses data and algorithms to achieve the intended results. While powerful, modern AI has its limitations. For example, humans are better than machines at empathizing. Customers act differently with humans than they do with machines. Humans are better than machines in establishing the contest of particular purchases - for example, wedding and anniversary gifts call for different sensitivities than many other more routine purchases. Machines on the other hand are better at finding nuances in data being used, in determining product categories for particular market segments, even in determining customer clothing sizes.

What this means is that human and machine activities must be carefully thought out and implemented. Experience has shown that these activities should be as discrete as possible, so they don't overlap.

Effective implementation of AI also requires the means to update that strategy as experience accumulates.

For a particular use-case, check out this link. 

How AI is Affecting Accountants

The accounting industry is gearing itself for a major upheaval because of the implementation of artificial intelligence. The massive changes on the way - and already happening - are truly impressive. A recent report by PWC makes this clear.

In a global sense the report states that GDP will be up by 14% by 2030 as a result of AI. A high portion of this growth will come the replacement of workers in routine jobs by AI, something which is not new for technology but will be speeded up and enhanced with AI. And there will be new jobs for those who must manage and supervise the AI applications.

The impact of AI by augmenting or replacing humans is well known. The PWC study goes a lot further. To illustrate, it includes the following example of an AI application:

"An online insurer has leveraged an AI bot to automate the claims process from beginning to end. Instead of the days or even months it traditionally took to settle a claim, the bot is able to complete the entire pipeline from claims receipt, policy reference, fraud detection, payout and notification to customers in just three seconds."

Both accountants and auditors are deeply affected by this kind of application. Both are required to have a knowledge of the control system. Since this control system has been placed entirely under the actions of an AI bot, the accountants and auditors need to have a good understanding of how that bot works - in principle and in practice. They need to know how to test the effectiveness of that bot.

Multiply this by thousands to AI bots and you have an appreciation of why people are calling the AI revolution transformative.