Navigating Change by I-invest

NAVIGATING CHANGE JUNE 2024 www.i-invest.io

A SUPPLEMENT BY I-INVEST

THE GREEN WEB Krystal Hosting prove why tech and sustainability go hand in hand

Right at home.

Mortgages, by

Your property may be repossessed if you do not keep up with repayments on your mortgage. To apply you must be 18+ and resident in Guernsey or Jersey. All mortgages are subject to status and valuation.

Butterfield Bank (Guernsey) Limited (“BBGL”) is licensed and regulated by the Guernsey Financial Services Commission under The Banking Supervision (Bailiwick of Guernsey) Law, 1994 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987, each as amended from time to time, under registration number 85. BBGL’s products and services are available in Guernsey and only in those other jurisdictions where they may be legally offered or obtained. BBGL is registered under the Data Protection (Bailiwick of Guernsey) Law 2017, under registration number 11160 and with the Guernsey Registry under registration number 21061. BBGL’s registered office address is P.O. Box 25, Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3AP.

Everyone deserves a home they love; one that’s a place of refuge in a hectic world, and a source of pride and security.

Whether you’re searching for the perfect place, or looking to make improvements, your mortgage or renovation loan should be as comfortable as the place you call home.

Let’s have a conversation about how Butterfield can make that happen.

Guernsey: 01481 751 900 Jersey: 01534 843 300

butterfieldgroup.com

Butterfield Bank (Jersey) Limited (“BBJL”) is regulated by the Jersey Financial Services Commission to conduct deposit- taking business under the Banking Business (Jersey) Law 1991 (as amended), and investment business, fund service business and money service business pursuant to the Financial Services (Jersey) Law 1998, (as amended). BBJL is registered under the Data Protection (Jersey) Law, 2018 and is registered with the Jersey Registrar of Companies for the purpose of the Companies (Jersey) Law 1991 (as amended). Registered office address: St. Paul’s Gate, New Street, St Helier, Jersey JE4 5PU. Company registration number 124784. Terms and Conditions can be obtained from our website and copies of the latest audited accounts are available on request.

BBGL and BBJL are wholly-owned subsidiaries of The Bank of N.T. Butterfield & Son Limited.

A WORLD FIRST

You will find the world’s first regulated green fund in Guernsey.

It’s part of what makes us a specialist global financial centre at the forefront of green finance.

WEAREGUERNSEY.COM

UK

Guernsey France

INSURANCE

E: T:

INVESTMENT FUNDS

info@weareguernsey.com +44 (0)1481 720071

TRUST & COMPANY PENSIONS

weareguernsey.com

INVESTMENT MANAGEMENT

BANKING

CONTENTS 06 GREEN TECH

06

We catch up with CEO of Krystal Hosting Simon Blackler to learn about the sustainability ethos that underpins the company’s all encompassing service.

10 AI / MARKETING Laura Lane of HubSpot discusses how marketing departments can prosper by striking the right balance between human creativity and AI precision.

10

12 AI / REGULATION Author and AI expert Nell Watson looks at where policymakers should be channelling their focus to ensure AI regulation is productive; while Ana Paula Assis of IBM outlines the critical steps for compliance with the EU’s AI Act.

18 INNOVATION & ENTREPRENEURSHIP A host of Europe’s leading universities and business schools look at why organisations unknowingly shape the ideas they receive, and why entrepreneurs can often ignore important financial warnings.

Navigating Change is a supplement of i-invest and is published by: CDN Media 2 Bath Place Rivington Street London EC1V 9DR +44 (0) 203 093 3078

12

16

www.i-invest.io

NAVIGATING CHANGE l 5

GREEN TECH

WEB HOSTING’S GREEN FUTURE

Above: Krystal’s vision of tech and sustainability hand in hand

An interview with Simon Blackler, CEO of Krystal Hosting Ltd

K

rystal Hosting was founded in 2002 by CEO Simon Blackler with a vision to provide a greener, fairer web hosting service – one where the customer and the environment comes first. Krystal is growing all the time, and is on a mission to prove that rapid progress in tech sustainability can be achieved without sacrificing performance, reliability, or the bottom line. The firm currently has 67 dedicated members of staff across London, Amsterdam, Phoenix (Arizona), and Edison (New Jersey), and works with large organisations, startups, developers or agencies. In a nutshell, if you want

6 l NAVIGATING CHANGE

to succeed online, Krystal Hosting should be your first port of call.

Navigating Change caught up with CEO Simon Blackler to find out more about what makes this innovative company tick.

What’s the inspiration behind Krystal, how did it all begin?

Simon Blackler: Founded on a trampoline and a shoestring budget, Krystal exists for more than profit.

Here’s how our story began.

Switching to a web host powered by renewable energy can make a positive impact

When it comes to security, we spare no expense Simon Blackler, CEO of Krystal Hosting

Over the summer of 2002, two teenagers developed a fansite for an upcoming computer game. Off the back of that experience, they went out into the world to build and host websites for clients. What they found was awful! Web hosting was unreliable and offered poor value. There was rarely a phone number or way to contact the provider. To make matters worse, hosting companies routinely changed hands, and shortly thereafter service levels would drop as the new owners cut costs.

The pair knew they could do better so resolved to provide a viable alternative.

With a commitment to be “Honest, Reliable

& Personal” – a slogan you’ll still find on the Krystal website today, they set about changing the way business was done. They promised never to sell the company to their competitors – instead they set out to challenge them, and committed to using their profits to benefit the planet along the way. Their original purpose and mission has not changed in over two decades.

Today, Krystal is still family-owned, employs 67 staff (and is hiring!) and is now the UK’s largest independent web host. It is also the world’s first – and as far as we know only – B Corp-certified web hosting and public cloud provider.

Your website says “web hosting that’s fair to you and the planet”. Please expand on this aspect and explain what sets Krystal apart.

SB: Many people have never thought about digital emissions. And it’s easy to understand why: when anything that appears online – whether it’s text, photos, videos – is all happening on a screen, it’s difficult to associate it with the impact it has in the “real” world.

Unfortunately, the reality is that any sort of digital activity generates carbon emissions, and sometimes in huge quantities.

Behind the scenes, the data centres that store and transmit online content require a

NAVIGATING CHANGE l 7

GREEN TECH

serious amount of energy to power and keep cool. What’s more, the majority of web and cloud hosting providers still operate through traditional facilities that are heavily reliant on fossil fuels. In fact, studies estimate the information and communication technology (ICT) sector’s share of global electricity usage is now around 3%, resulting in a carbon footprint comparable to that of the entire aviation sector.

However, there is hope. Switching to a web host powered by renewable energy can make a significant positive impact. In 2017, Krystal became one of the first web hosts to be powered by 100% renewable electricity from the sun, wind and sea. As we’ve expanded into additional data centres around the world we made sure that they are all powered entirely by renewable energy too.

We aim to be a regenerative business, one that gives back more to the planet and society than it takes. So, we also work with tree-planting organisations around the world to help reforest coastlines, build up local communities, return land back to wildlife, and sequester carbon. We have already planted six million carbon-cancelling, habitat-restoring trees, and we plan on planting and protecting hundreds of millions.

In early 2023 we became the world’s first B Corp web host and public cloud provider, and signed up to “1% for the Planet”, making a commitment to donate at least 1% of our revenue to environmental causes around the

world. Krystal is on a mission to prove that rapid progress in tech sustainability is not only possible, but can be achieved without sacrificing performance, reliability, or the bottom line. By choosing Krystal, you’re not only reducing your digital emissions and helping to fund restoration initiatives around the world, you’re also enhancing the speed and reliability of your online presence. It’s a Win-win!

What else does Krystal offer that you wouldn’t find elsewhere?

SB: The clue is in our name, chosen to represent “value, quality and transparency”.

We operate in a way the large, faceless hosting corporations cannot hope to match. We’re passionate about web hosting and doing the right thing by our clients, our staff and society.

We’ve never paid a shareholder dividend and reinvest our profits into improving our service and protecting the planet.

We build and run our own infrastructure, and we never compromise on quality or ethics.

As a team of technologists who love solving problems, we obsess over using the very best tech and care deeply about getting our service just right. For you, this means world-class solutions with a planet-first focus. Being a “Honest, Reliable & Personal” alternative to hosting corporations that run solely for profit also means that you’ll never have to put up with misleading prices, hidden extras or sneaky

Krystal Hosting is 100% powered by renewable energy

8 l NAVIGATING CHANGE

clauses. Our customer support is the envy of the industry; always superb and easy to obtain.

We’re three-times winners of the Internet Service Providers’ Association “Best Hosted Service” award and we’ve garnered over 1,700 5-star reviews for our world-class, planetfirst service. Speak to our support staff and you’ll get the collective wisdom of dedicated, passionate technologists who take pride in keeping your business online.

What other providers call “extras”, we include as standard. All our hosting plans include award-winning UK support, an industry-best 99.99% guaranteed uptime, flexibility to upgrade or downgrade, and our 60-day money-back guarantee.

As a purpose-driven business we think in decades not quarters and plan to be here for the long term, so we’ll never sell our clients to another provider. With no change of ownership Krystal customers enjoy consistent service, ethics and quality.

You have your own in-house cloud solution, Katapult. Please unpack this service and what makes it unique.

SB: Katapult is our master-crafted ultra-fast cloud. It’s designed and developed in the UK by our elite Krystal Labs team using only the very best components, including cutting-edge processors, 100% NVMe allflash storage, triple-copy redundancy and redundant 100G network. Katapult servers

Katapult: Krystal’s master-crafted ultra-fast cloud

use redundant components throughout; CPU, RAM, power supplies, network cards and disks, over which Katapult’s storage technology, Storpool, keeps three copies of data spread across hundreds of NVMe disks. This offers superb performance and reliability compared to current industry norms.

Katapult has been meticulously crafted to be not only highly performant, but as sustainable as possible too. As a result of our no-expense-spared engineering, we’re able to run our hardware for up to twice as long as alternative providers, crucially without sacrificing performance or availability. This is better for the planet because we’re using resource-intensive hardware for longer.

No other hosting company we know of owns anything like Katapult. If your business is looking for a world-class cloud experience for hosting your websites and applications, then Katapult’s scalable compute platform is for you.

Also, please outline some of the business partnerships that feed into Katapult and the value they bring.

SB: Just as we’ve cherry-picked the very best components for Katapult, we’ve also opted for world-class partnerships to support what we believe is the world’s best public cloud platform.

We’ve partnered with AMD and Nvidia to offer leading-edge processor technology.

AMD’s EPYC processors offer the optimum balance between cores per chip and overall frequency with efficient power draw.

For rendering, machine learning or AI workloads, these are paired with Nvidia GPUs for powerful and efficient parallel processing with full CUDA support.

Katapult also uses cutting-edge flash technology. Combined with key partners’ VAST and Storpool’s efficient, reliable and scalable storage software, it delivers one of the highest performing distributed storage offerings in the world.

We have also integrated revolutionary and agnostic software from Cumulus and combined it with enterprise-grade hardware from Mellanox and Juniper to deliver a reliable, robust and readily scalable network architecture perfectly suited to the evolving demands of the Katapult platform. Basically, you won’t find better.

Cybersecurity must be top of every CTOs agenda right now. Outline the main threats as you see them, and the security advantages that Krystal can offer.

SB: The main threats we face as hosting providers are DDoS (Distributed Denial of Service) attacks, outdated and vulnerable software, weak security configurations, phishing and social engineering. If not properly addressed and mitigated, these threats can cause anything from server downtime and slow performance to

unauthorised access, data breaches and financial loss.

This is why, when it comes to security, we spare no expense. We run virus and malware scans automatically and for free across all services. We regularly patch and update our servers to ensure they’re running the latest secure software. We also protect them with both firewalls and the industry-leading CloudLinux operating system, which is used to fully isolate user accounts for maximum security and to ensure assigned resources are always available. Our hybrid DDoS protection combines local Corero scrubbing appliances with up-stream in-line filtering to offer real-time and fully automated attack mitigation. We provide 2 Tbps of DDoS protection as standard for free.

In short, you get the very best security that hosting can provide, at no extra cost.

What is Krystal’s stance on AI? SB: As a business we’re evaluating where we can use AI to augment humans. At the same time, our slogan is “Honest, Reliable, & Personal” so we’ll always make sure that you can speak to a person in your country who understands you and speaks your language.

Our support team always try to solve issues at the point of contact wherever possible, without needing to escalate. To help us accomplish this, we have an AI assistant that we incorporate into Live Chat that gives our support team information based on the customer’s previous message.

This allows them to have shortcuts to hand, aiding their response, whilst still having the full decision-making on the side of the human. This increases the chance of a firsttime resolution.

Our software development team uses GitHub Co-Pilot AI to help them build quality software quicker. We also help our clients unlock the full potential of AI with Katapult’s cloud-based GPU (Graphics Processing Unit) solutions.

AI has huge potential for improving processes and productivity and will yield the best results when used alongside human experience, empathy and judgement. ■

Further information krystal.io

NAVIGATING CHANGE l 9

AI/MARKETING

Human creativity meets machine precision

By embracing a new fusion of AI time-saving tools and human finesse, marketers can look to the future feeling secure and confident, says Laura Lane of HubSpot

I

n the world of marketing, AI still sparks a mix of excitement and raised eyebrows. As someone deeply rooted in this conversation at HubSpot, I’ve seen the full spectrum of industry reactions to AI – from wide-eyed optimism to cautious scepticism.

Yet, the narrative is shifting: AI is not to be feared, it is to be embraced and used to help us be more creative, enhancing precision and innovation.

With 69% of marketers in the UK already concerned that AI will create biased or plagiarised content, some marketers are understandably concerned about AI killing off creativity and authenticity. But are their concerns misplaced? Can AI comprehend what it means to be us? Can it reflect our brand’s heart and soul? With a third of marketers having concerns here, it’s clear AI has a few doubts to quell.

However, the reality is starkly different. It’s been easy for people to err on the side of caution when it

10 l NAVIGATING CHANGE

When it comes to mundane tasks – let’s leave it to the robots

comes to AI, but the potential of AI to free us up from the grind, saving three to five hours on each piece of content and getting to know our audiences on a level that feels like reading minds. And that’s just scratching the surface of how AI can help marketers.

Working smarter, not harder So, how do we work with AI without stepping on our brand’s toes? Clear objectives, a touch of human finesse, and continuous learning paired with the right measurements in place to ensure successful AI implementation. This should always be built upon a foundation of a brand’s ethics to ensure it never strays away from who it represents, respecting privacy and avoiding bias.

For today’s modern brand, AI is not an option, but a necessity. It’s all about doing more with less – predicting customer behaviours with startling

ABOUT THE AUTHOR

Laura Lane is Head of Marketing at HubSpot.

accuracy, automating the mundane, and crafting personalised content that strikes a chord with audiences. AI’s capability to process and analyse data quickly translates into valuable insights, empowering marketers to craft campaigns that genuinely resonate with their audience.

AI’s role in marketing is diverse and transformative.

It’s redefining customer engagement with chatbots that mimic human conversation, automated emails that hit just the right note, and content that adapts in real-time to the viewer’s interests. Beyond just understanding customer desires, AI is making every marketing move more informed, more strategic, and more effective. As AI evolves, it’s clear: the future of digital marketing is not just about reaching audiences but resonating with them on a whole new level.

For marketers, AI offers a multifaceted toolkit that can significantly enhance day-to-day operations.

For example, personalisation facilitated by AI helps marketers tailor content and recommendations based on individual preferences and behaviour patterns, thereby fostering stronger connections with target audiences. We then have AI-powered brainstorming tools that can aid marketers in generating innovative ideas and refining strategies by analysing vast datasets and identifying emerging trends. When it comes to visual content, AI-driven video editing and creation platforms streamline the production process, enabling marketers to craft compelling and engaging videos with ease – potentially saving time and money. Furthermore, AI-driven time-saving tools, such as content assistants, automate mundane tasks like scheduling posts and analysing metrics, freeing up valuable time for strategic planning and creative endeavours.

This might sound like something just being spoken about for the future but a lot of businesses are already

on the AI-wagon. There are a host of examples such as Virgin Voyages’ Jen AI campaign, which leveraged an AI version of Jennifer Lopez and achieved an engagement rate 150% higher than traditional campaigns. Or Coca-Cola’s “Create Real Magic” initiative, which demonstrated how AI can democratise content creation, allowing consumers to co-create and strengthen their connection with brands.

Carvana crafted 1.3 million unique AI-generated “joyride” videos, tailored to the specifics of car model, colour, and even cultural context, all processed at a staggering rate of 300,000 videos an hour. Spotify’s venture into AI-driven voice translation for podcasts breaks language barriers, offering a personalised listening experience without losing the podcaster’s original voice. The list goes on.

Looking ahead to amplifying creativity and connections AI can’t emulate human creativity and connection as it doesn’t come with the rich lived experiences and opinions that we have. AI would be useless without human knowledge, strategy, and implementation. So, when it comes to mundane tasks that take up way too many of our hours – let’s leave it to the robots.

Embarking on the journey of AI integration can be an invigorating experience. It’s an opportunity to experiment and learn, discovering first-hand how AI can not only streamline and automate routine tasks but rejuvenate marketing campaigns and strategies.

Let’s embrace AI with curiosity, creativity and with the excitement of explorers on the brink of a new frontier. Because, in the end, that’s what we are – explorers, storytellers, connectors. And with AI, we have a new set of tools to paint our stories in brighter, bolder colours than ever before. ■

NAVIGATING CHANGE l 11

A I / R E G U L AT I O N

How should we handle humanity’s problem child?

Policymakers must remain focused on overseeing harmful applications rather than restricting beneficial technologies if AI regulation is to be productive, says expert and author Nell Watson

I

n 1965, British mathematician Irving John Good, a colleague of Alan Turing at Bletchley Park famously said: “The first ultra-intelligent machine is the last invention that man need ever make, provided that the machine is docile enough to tell us how to keep it under control.” Even though Good would go on to serve as a consultant on supercomputers for Stanley Kubrick’s 2001: A Space Odyssey, it’s debatable whether he could have imagined the genie would be out of the bottle quite so soon.

The rapid rise of agentic AI – artificial intelligence systems capable of adaptively achieving complex goals with minimal oversight – presents humanity with immense opportunities and risks. Today’s large language models, though not built for planning and real-world action, possess latent agentic capabilities that, when combined with additional programs, allow them to reason, self-check, and solve challenges autonomously. The first such models are now emerging, demonstrating remarkable capacities for innovation and problem-solving. While promising tremendous value, this raises concerns about AI optimising for objectives misaligned with human intent, potentially causing severe physical, emotional, financial, and reputational harms, as well as harms to knowledge and understanding.

A key challenge is the difficulty of robustly encoding human values into AI systems to ensure proper alignment. Even fully specifying human preferences may not suffice. Translating those preferences into machine objectives that reliably produce intended behaviour remains an unsolved problem. Slight misspecifications could lead to unintended and

12 l NAVIGATING CHANGE

AI safety isn’t just about preventing malicious use

potentially catastrophic consequences. Ensuring advanced AI remains responsive to human oversight and modification is critical. Guardrails like iterative feedback loops, robust monitoring, and emergency shut-off procedures are needed to safely interrupt and correct misaligned AI systems. Research into corrigible and interruptible AI architectures should be prioritised.

Current language models integrated with application programming interfaces (APIs) are already tackling real-world problems powerfully. But this is only the beginning. Agentic AI paves the way toward artificial general intelligence (AGI) that could match and exceed the human mind, automating cognitive work on an unprecedented scale. An AGI could supercharge technological progress by synthesising knowledge across disciplines and improving itself.

Parallel advances in quantum computing, biological substrates, robotics, manufacturing, and materials science could expand the possibilities for humans flourishing a hundredfold within a generation, but they also introduce novel existential risks.

The breakneck pace of AI progress, fuelled by an intense commercial race to develop larger, faster, more opaque models, makes its trajectory unpredictable and potentially catastrophic. As models scale up and training data becomes richer, they gain capabilities in unexpected, uncontrolled leaps. More advanced systems are increasingly likely to develop recursive self-improvement capacities, potentially leading to a difficult-to-control intelligence explosion.

We may be closer to AGI than commonly believed.

From there, the path to a superintelligence that rapidly eclipses humanity could be short and abrupt.

A I / R E G U L AT I O N

Formidable challenges of regulation Without dramatic progress in AI alignment and transparency, this acceleration process becomes enormously risky. An advanced AI pursuing goals even slightly misaligned with ours could pose an existential threat, even without explicit malicious intent. A sufficiently advanced system vigorously pursuing a misspecified objective without common sense or concern for negative impacts could cause immense damage. AI safety isn’t just about preventing malicious use – it’s about ensuring advanced systems remain safely under human control and are understandable as they grow in power.

Policymakers face a formidable challenge in regulating this promising but perilous technology, and the EU’s AI Act is an important step in the right direction (see overleaf). They must proactively guide its development without unduly stifling beneficial innovation. Public opinion appears wary of unfettered AI development and sceptical of industry self-regulation adequately managing risks.

Governments therefore have a pivotal role to play, in concert with industry and civil society, to establish regulatory guardrails.

One approach is to mandate formal predeployment safety certifications, especially in high-stakes domains. Developers could be held legally liable for harms caused by unsafe deployments. Models should undergo rigorous assessment for potential misuse or adverse societal impacts prior to release, with system transparency and interpretability being key factors. Black-box models, impossible to audit, present greater risks. Systems exhibiting agentic planning, self-modification, deception, or context manipulation warrant heightened scrutiny. Ongoing monitoring is critical for catching unanticipated problems.

Robust accountability mechanisms will be crucial for incentivising responsible development. Legal liability for AI harms should be clearly allocated to the appropriate parties. Ethical review boards, audits, and impact assessments can help ensure appropriate oversight. International coordination will prove vital for upholding consistent standards and preventing a race to the bottom. The ability of advanced AIs

14 l NAVIGATING CHANGE

to potentially co-opt weaker systems also necessitates monitoring AI-to-AI interactions.

However, poorly constructed restrictions could backfire. Regulating rapidly evolving capabilities is deeply challenging.

Policymakers must remain laser-focused on overseeing harmful applications rather than restricting beneficial technologies.

Rigid constraints might drive development underground while hampering valuable research. An adaptive regulatory framework that evolves as capabilities advance while robustly serving the public interest is needed.

If AI proves to be an existential threat, poorly designed regulations could worsen things by creating severe power imbalances.

Maintaining openness and trust through open-source AI development could enable broad participation and sharing of expertise. This approach would also facilitate collaborative efforts to identify and mitigate potential threats. Regulating high-risk applications and mandating disclosure can help address harms and inform responsible use without restricting potentially beneficial technologies. As AI’s complex impacts remain uncertain until more advanced systems emerge, we must regulate judiciously to avoid unintended negative consequences.

Increasingly autonomous AI will profoundly impact human agency in complex ways, demanding proactive policy consideration.

AI systems that deceive humans pose serious risks to personal autonomy. Key concerns include consent, privacy safeguards, and avoiding excessive dependence on AI systems.

We must carefully balance AI’s benefits against the importance of human decisionmaking and control.

As we enter an era of increasingly agentic AI, the need for foresight and wisdom couldn’t be more pressing. The systems we build today are the scaffolding for what could become the most powerful technology in history – with the potential to help solve humanity’s greatest challenges or imperil our very existence.

While further breakthroughs are needed to develop AI capable of open-ended learning and planning, we are swiftly approaching a threshold where AI begins to match and exceed human cognition across myriad domains.

These systems, if developed without rigorous safety constraints, would prove immensely

Taming the Machine: Head to youtube. com/watch?v=Bo4lkaFUPhY for a short film to help you learn more about navigating the challenges of agentic AI

difficult to control. This risk is especially severe if they gain power and influence through coopting economic and political systems.

The AI technologies developed in the coming years could be immensely beneficial, but only if we establish the proper foundations today. By crafting judicious regulations focused on ensuring advanced AI remains safe and beneficial, we can create a governance framework to harness the rewards and mitigate the risks. The alternative – recklessly forging ahead without a shared safety roadmap – is to treat humanity’s future as an afterthought.

We must proceed thoughtfully and carefully, with collaboration across stakeholder groups, to establish clear guidelines. With foresight and proactive leadership in Europe and beyond, we can build a future in which increasingly agentic AI systems remain a wellspring of flourishing rather than an existential threat. ■

The need for foresight and wisdom couldn’t be more pressing

ABOUT THE AUTHOR

Nell Watson is an AI expert, ethicist and author of ‘Taming the Machine: Ethically harness the power of AI’ published by Kogan Page, priced £13.94. www. tamingthemachine.com

Compound Semiconductors

Harriet Rees Head of Data Scicence, Starling Bank

THIS IS ENABLING. Compound semiconductor technology is at the heart of the next industrial revolution, and it is coming together in one place – Wales.

Academia, Government and industry are collaborating here to develop the world’s first compound semiconductor cluster.

THIS IS WALES. INVESTED.​

Find out what Wales can do for your business: +44 (0) 3000 6 03000 | tradeandinvest.wales

A I / R E G U L AT I O N

EU compliance: An opportunity to strengthen AI strategies

Ana Paula Assis of IBM casts an eye over the EU AI Act, outlining the critical steps for compliance and the advantages it will bring

T

he EU AI Act has ushered in a new age for artificial intelligence in Europe. As the world’s first comprehensive legal framework for AI, the act has been developed to ensure the safety and transparency of AI systems across the EU. This new framework will be hugely beneficial for businesses, bringing certainty and clear guardrails for AI strategies for the first time. Creating a roadmap towards compliance should be a top priority for businesses in 2024.

A risk-based approach Understanding the Act’s risk-based approach is the first stage in the journey to compliance. This approach, intended to promote safe AI usage while encouraging innovation, requires AI systems to be classified and regulated based on the risk they pose. Risk levels span from “unacceptable” practices, including social scoring, to “high-risk” areas like credit scoring, “limited risk” use like chatbots, and “minimal risk” applications, such as spam filters. Generative AI will not be classified as high-risk, but its usage must comply with transparency requirements and EU copyright law, including AI-generated content disclosure and summaries of copyrighted training data.

The EU has adopted a phased implementation approach, with prohibitions taking effect in six months and most provisions applicable in two years.

With set timelines in place, organisations should start preparing to meet the standards as soon as possible. The first step is completing a comprehensive model inventory.

Performing a thorough inventory of all your business’s AI and ML applications will provide you with a clear view of your data and applications subject to the act.

The second step is undertaking a comprehensive risk

16 l NAVIGATING CHANGE

assessment to ensure all relevant obligations are fulfilled.

For example, high-risk AI use cases come with seven essential requirements related to human oversight, technical robustness, privacy and data governance, transparency, fairness, and accountability. A complete risk assessment will also consider reputational and operational risks.

The third step is implementing technical standards.

European standardisation organisations are developing new technical standards to facilitate this, as has the International Organisation for Standardisation (ISO), which recently released a new standard called ISO42001, to be adopted by the EU as a framework for risk management systems.

Building a responsible, ethical ecosystem Organisations should view the compliance process as an opportunity to strengthen AI governance strategies.

By building a framework for responsible, governed AI, businesses can confidently operate, manage risk and reputation, and build trust among employees and stakeholders.

Establishing an AI ethics board is paramount in building this ecosystem. Compliance with the Act demands a certain level of ethical consideration, but companies must also define their ethical approach to AI and establish guidelines to direct implementation and future innovation.

While there will still be challenges ahead – such as a steep learning curve for less regulated sectors or the emergence of diverging global frameworks – the EU AI Act signifies an important step for the future of responsible AI and one that promises to bring increased competitiveness and innovation to Europe and beyond. ■

Establishing an AI ethics board is paramount in building this ecosystem

ABOUT THE AUTHOR

Ana Paula Assis is Chair and General Manager, EMEA, IBM.

How can you accelerate and protect your business?

In business, standing still is not an option. You need to invest in the future. But to get adequate financing, it is imperative outstanding invoices are well managed.

That is why Atradius supports you with innovative information tools that come with your insurance.

This allows you to manage secure stable customer payments and consequently, fortify your financial position.

Secure your financing, go to atradius.com Credit Insurance | Debt Collections | Business Information

I N N O VAT I O N & E N T R E P R E N E U R S H I P

Inexperienced entrepreneurs likely to ignore important financial warnings

W

Businesses unintentionally discourage diverse ideas

B

usinesses influence the ideas they receive from external contributors by unintentionally signalling which ideas they like, finds research from ESMT Berlin and INSEAD. This leads to a narrow set of nondiverse ideas.

Professor Linus Dahlander from ESMT Berlin, alongside Professor Henning Piezunka and PhD candidate Sanghyun Park from INSEAD, analysed 1.44 million ideas to understand how organisations unknowingly shape the ideas they receive. Data came from organisations that asked visitors how they could improve their websites before choosing which ideas to use.

Chosen ideas were communicated for all to see.

The analysis reveals that organisations with higher consistency in selection tended to favour similar ideas. Over time, contributors adjusted their proposals to align more closely with perceived organisational preferences, enhancing their likelihood of acceptance but also resulting in reduced diversity in the ideas submitted. Individuals who felt their ideas were less likely to be selected gradually ceased making suggestions. Consequently, while the relevance of the ideas submitted may have increased, their diversity diminished.

The researchers also found that idea diversity increased when new contributors, less aware of past organisational choices, made suggestions.

Increased diversity of ideas was also observed after established contributors, who would have been influenced by earlier selections, stopped suggesting.

However, when contributors interacted more, attention to a company’s preferences heightened, causing an increase in similar ideas.

Professor Dahlander explains: “The result of external searches often yields a more limited set of ideas than commonly perceived, representing a trade-off between fit and diversity. Organisations tend to favour ideas that align closely with their current interests, which can be beneficial.” He adds: “However, this preference for fit can incur costs: it may prevent organisations from encountering ideas that diverge from their usual practices, inadvertently narrowing the creative scope of external contributors. By not constructively engaging with diverse perspectives, organisations risk losing access to innovative ideas and may miss out on pivotal breakthroughs.”

As interactions among external contributors direct their attention toward existing ideas and away from novel ones, managers seeking diverse ideas may benefit from limiting interactions among external contributors. Reducing the visibility of ideas selected could also prevent contributors being influenced by what they think companies want.

These findings were published in the Academy of Management Journal. ■

18 l NAVIGATING CHANGE

annabe entrepreneurs are highly likely to ignore poor financial performances in order to pursue their dream, according to new research by emlyon business school and ESC Clermont Business School. The researchers found that in the early stages, new entrepreneurs are so blinded by their dreams of becoming successful, they believe entrepreneurial spirit can get them out of a difficult situation.

They add that common myths about entrepreneurs, such as not making a profit early on, enduring poor financial results, or that entrepreneurs all go through hardship at the beginning, mean that entrepreneurs ignore early warning signs of poor performance and potential failure.

These findings come from research conducted by François-Regis Puyou, Professor of Accounting & Corporate Finance at emlyon business school, and his colleague Maxence Postaire, Professor of Management Control at ESC Clermont Business School.

Entrepreneurs used tactics to overcome disappointing performance such as redoubling their efforts, boosting sales forecasts relying on unrealistic new service developments, and willingly enduring economic hardship (i.e. not being paid) for the time deemed necessary for the company to grow profitable.

The researchers say that entrepreneurs must be more objective when it comes to their accounting reports. It is important for them to stay as level-headed as possible and not continue to pursue something that is clearly likely to fail.

One way the researchers suggest doing so is ensuring that the entrepreneurial team is as diverse as possible, so that entrepreneurs have opposing voices, as well as more reasonable and sensible points of view in the organisation. ■

The ultimate expression of the Range Rover icon Overfinch is the wor ld’s leading creator of bespoke Range Rover vehicles. Since 1975 Overfinch have been redefining iconic Land Rover and Range Rover models, dedicating British craftsmanship to the pur suit of perfection. The results are a ground-breaking blend of capability, individuality and luxur y.

overfinch.com