NEWS Briefs

Stephen Wunker | Forbes | April 29, 2023

First Republic grew like a weed through its innovative business model. From 2011 (right after its IPO) to 2022, its assets increased roughly 10-fold. Then it went off the rails. The story holds lessons for innovators everywhere.

The bank’s magic stemmed from its holistic approach to clients—rather than seeing customers as a collection of owned products, it viewed them through the lens of a relationship. First Republic wouldn’t just pitch for a business’ line of credit or asset finance, for example, but also aim to get the owner’s mortgage and wealth management too. This was a bright idea—the bank wasn’t cross-selling in the traditional sense, but rather seeking overall relationships right from the get-go.

But there was a problem. This unique model made risk hard to assess. Theoretically, the bank should have had superior insight into someone’s overall liquidity, the health of their business, and their financial prospects. In practice, that’s hard to execute. A few companies work out detailed, sophisticated ways to alternatively assess risk (see: Capital One). More seem to try and fail. So, the nature of the risks on First Republic’s books is hard to assess. Add to that, the bank financed its lending using some bad market bets, and it was a victim of the SVB-triggered bank run. So the stock is now down over 97% for the year, and even at a bargain-basement price the company has struggled to find a buyer.

Here’s the big lesson: innovation and risk management shouldn’t be opposites. They’re complements. If you’re going to build a truly innovative business or business model, there will absolutely be risks. Many companies reflexively dislike these, don’t articulate them well, and kill the idea early. A few just go for it and worry about the risks later. Neither course is a good one. A far better route is to build up a capability in risk management alongside a strength in innovation.

Read More: https://www.forbes.com/sites/stephenwunker/2023/04/29/first-republicshows-why-risk-management-and-innovation-should-be-allies-notenemies/?sh=716c3ce06fe5

Briefing Room | WhiteHouse.Gov | April 28, 2023

Powerful hurricanes, typhoons, and tropical storms can devastate our communities, threaten the lives of our families, and damage everything we have worked so hard to build. During National Hurricane Preparedness Week, we raise awareness about the hazards posed by hurricanes and share resources to help Americans stay safe and protect their property before these storms make landfall. We also celebrate the remarkable first responders and community members who help rescue, recover, and rebuild in the aftermath of these natural disasters.

During last year’s hurricane season, especially in Florida and Puerto Rico, we witnessed the overwhelming damage these storms so often leave in their wake. Families lost their homes. Business owners lost their livelihoods. Survivors were left with unimaginable grief. As the climate crisis intensifies, the impacts of storm surges, flooding, mudslides, and heavy rainfall will only increase, and communities that lack the resources to respond and recover will be hit hardest.

That is one reason why I signed the historic Bipartisan Infrastructure Law, which will keep Americans safer from natural disasters by building stronger roads and bridges, improving levees and floodwalls, and making our power grid more resilient. This law includes over $50 billion to shore up our defenses against flooding and other weather and climate disasters. It provides States with billions of dollars to prepare evacuation routes and improve other at-risk coastal infrastructure. It also invests in communitywide planning to ensure that those most impacted by extreme weather have a voice in preparing for the future.

Our Inflation Reduction Act takes these efforts a step further, making the largest investment in our Nation’s history to combat climate change. With historic funding for green manufacturing, clean energy development, and climate-smart agriculture, this law puts us on a path to cut America’s greenhouse gas emissions in half by 2030. It gives families tax credits to make their homes more energy efficient, saving money and helping ensure that the power stays on when the grid goes down. And it provides the National Oceanic and Atmospheric Administration with billions of dollars to improve weather forecasting and invest in resilience projects in coastal communities that will help them more easily recover from extreme weather events.

Read More: https://www.whitehouse.gov/briefing-room/presidential-actions/2023/04/28/aproclamation-on-national-hurricane-preparedness-week-2023/

Yasamin Parsafar | National Law Review | April 27, 2023

AI technology is a powerful tool and “with great power comes great responsibility.” Use of AI technology can give rise to various forms of liability that may not even occur to you. And use of generative AI impacts not only your liabilities but also your rights.

If you are developing or using products that use AI technology, it is important to understand the legal implications and factor them into your governance and risk management policies as soon as possible, if you have not yet done so. And even if you do not use or develop AI-driven products as a company, whether known or unknown to you, it is likely you have employees or vendors who are using generative AI tools in the performance of their duties. They may be using these tools to do anything from writing code to creating images, music, apps, or your marketing content. Your employees’ and vendors’ use of AI tools can impose liability and vulnerabilities on you in a significant way. As the FTC explained: “If something goes wrong – maybe it fails or yields biased results – you can’t just blame a third-party developer of the technology. And you can’t say you’re not responsible because that technology is a ‘black box’ you can’t understand or didn’t know how to test.”

Below is a high level overview of some AI-related liabilities and vulnerabilities to factor into your governance and risk management, including by updating your employee policies and third-party agreements, now.

Violations of Consumer Protection Laws May Result in Algorithmic Disgorgement

Have you ever heard of algorithmic disgorgement? If your employees or service providers use AI tools (and they probably do, or will soon), you should be aware of this severe penalty imposed by the FTC when consumer protection laws are violated in the process of collecting information used to train AI models.

Companies who use data that was unlawfully acquired or unlawfully used to train algorithms used in machine learning models or other AI tools may be required to destroy ill-gotten data as well as the algorithms or models that were trained using such data.

Read More: https://www.natlawreview.com/article/a

Arianna Prothero | GovTech | May 1, 2023

A rising number of state and federal lawmakers are crafting legislation that would restrict young kids’ access to social media and institute other protections for young social media users—all in the name of improving mental health.

But some policy experts worry that the bills—which are generating bipartisan support—will be difficult to enforce and may have unintended consequences.

“This is all new territory for Congress: how do you protect the First Amendment? How do you keep kids’ autonomy online?” said Allison Ivie, the government relations representative for the Eating Disorders Coalition for Research, Policy and Action, which has been tracking this issue closely. She was referring to a bill recently filed in the U.S. Senate. “There is a level of frustration in this country when we see these levels of mental health problems skyrocketing, and people want a quick fix.”

Many lawmakers, who are parents and grandparents, are seeing this problem play out in their homes, said Ivie. And she suspects there was an expectation from a lot of adults that kids’ mental health issues would dissipate once they were back to learning full time in-person again.

“That didn’t happen for a lot of kids,” she said. “The damage had been done. So, now it’s like, ‘they’re not the same kid—they’re still glued to their phone, and I don’t know what to about this.’”

Taken together, bills filed in at least nine states and at the federal level generally have three primary goals: compel social media companies to verify users’ ages; bar social media companies from using algorithms to recommend content to young users; and restrict minors from using social media either through age requirements, parental permission requirements, or curfews and time limits.

Read More: https://www.govtech.com/policy/policies-targetkids-access-to-social-media-but-will-they-work