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In the world of Third-Party Risk Management (TPRM), Artificial Intelligence (AI) is often seen as a powerful, transformative current. It carries us forward with promises of lightning-fast due diligence, predictive insights, and automated assessments.
But like any seemingly ‘perfect’ wave, what’s happening beneath the surface matters. Without a clear understanding of the currents and the ocean floor, we risk getting caught in an undertow. In TPRM, the consequences of irresponsibly adopted AI can be far more serious than a bad wipeout.
Let’s dive beneath the surface and examine the hidden forces behind the AI “waves” in TPRM, including the currents, the rogue swells, and the deceptive calm we need to watch for.
AI thrives on data, yet in TPRM, the data it needs is often sensitive, fragmented, or unreliable. Even a seasoned surfer needs to map the currents, just like AI needs trustworthy, well-governed data to perform reliably.
Yet, the very act of “sharing” this data with AI systems, particularly across geographical borders or with external third parties, can introduce serious risks around privacy, compliance, and exposure.
The biggest rogue wave of all? The infamous “black box.”
Advanced models like deep learning can deliver answers without revealing how they got there, much like a perfect wave that forms seemingly out of nowhere. In a field like TPRM, where transparency, auditability, and accountability are non-negotiable, that kind of opacity is more than unsettling.
Then there’s the risk of bias. If the AI’s training data is flawed, outdated, or imbalanced, its predictions may be just as misleading as a false calm before a storm. In TPRM, that might mean unfair vendor ratings, overlooked threats, or compliance missteps, all concealed beneath the polished surface of “smart” automation.
Even the most skilled surfer can’t navigate treacherous waters without a good spotter. Similarly, deploying AI in TPRM isn’t just about the technology. It’s about having the people, processes, and governance to support it.
Many organizations rush into AI adoption without first setting clear rules of engagement. There’s often no shared playbook on how to use AI responsibly, who owns the outcomes, or how to handle third-party tools using AI themselves.
What’s more, many companies lack the talent required to stay afloat. AI in TPRM isn’t just about coding or data science; it requires people who understand compliance, regulatory risk, and third-party dynamics. Without these skills, you’re essentially trying to ride a monster wave while still learning to paddle.
And let’s not forget the cultural resistance. TPRM has long been grounded in manual, compliance-heavy workflows. Asking teams to trust an AI’s “current” over their own judgment requires more than just technical training. It demands a shift in mindset, trust, and culture.
Just as surfers operate within the bounds of beach rules and marine warnings, AI in TPRM must play by a growing set of legal and ethical rules.
The regulatory landscape is shifting fast. The EU AI Act, for instance, brings stringent requirements, which is prompting other regulations to introduce their own unique nuances. Organizations must not only ensure their own AI practices are compliant but must also scrutinize their vendors’ use of AI.
Unfortunately, most existing oversight frameworks aren’t built to look beneath the surface. Certifications like SOC 2 or ISO rarely reveal how vendors are using AI, what data they’re feeding into it, or what outcomes it’s producing.
Then there’s the murky question of IP and data ownership. When vendors use generative AI or other advanced tools, it’s often unclear who owns the outputs or whether your proprietary data is being used to train someone else’s algorithm. That’s not just a bad ride. It’s a powerful riptide that could pull you under and cost you dearly.
AI holds undeniable potential to transform TPRM. But adopting AI in TPRM isn’t a solo ride – it’s a strategic effort requiring governance, collaboration, and transparency across the organization. And while the hype (and misunderstanding) around AI can make it seem like a perfect, endless wave, it’s critical that organizations and their risk professionals approach it with both excitement and wisdom. Before paddling out into the swell, we need to examine the currents, understand the risks, and build the right foundations to ensure we’re not being swept away by a false sense of security.
Only then can we successfully leverage this powerful technology to drive informed decisions and make real, sustainable transformation possible.
Ready to harness AI effectively in your TPRM program? Join our webinar on November 18 to learn about a phased approach for risk professionals to responsibly advance their own AI initiatives and explore how to create effective guidelines for assessing and managing the risks associated with AI. Register here.
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