1 00:00:00,050 --> 00:00:00,800 Case study. 2 00:00:00,800 --> 00:00:06,860 Managing third Party Risks in I innovate a comprehensive approach to data privacy and security. 3 00:00:06,890 --> 00:00:12,740 Artificial intelligence systems, while offering transformative potential, come with inherent risks, 4 00:00:12,740 --> 00:00:15,710 particularly when third party components are involved. 5 00:00:16,460 --> 00:00:22,430 Consider the case of innovate X, a leading financial technology company that leverages AI to enhance 6 00:00:22,430 --> 00:00:25,550 its customer experience and optimize operations. 7 00:00:25,940 --> 00:00:31,640 Innovate X is AI driven platform relies on data sets procured from third party vendors, proprietary 8 00:00:31,640 --> 00:00:37,160 algorithms, and third party software solutions to deliver personalized financial advice. 9 00:00:37,640 --> 00:00:43,130 The robustness of Innovate X's AI governance and risk management framework is put to the test when these 10 00:00:43,130 --> 00:00:46,250 external elements introduce unforeseen risks. 11 00:00:47,960 --> 00:00:54,470 Innovate X's CEO, Sarah, is a visionary who emphasizes innovation and ethical AI deployment. 12 00:00:54,800 --> 00:01:00,390 She is aware of the risks associated with third party components, but believes in balancing innovation 13 00:01:00,390 --> 00:01:02,850 with stringent risk management protocols. 14 00:01:03,300 --> 00:01:09,180 Sarah spearheaded a project to integrate a third party dataset from Data Ocean, a reputed data provider, 15 00:01:09,180 --> 00:01:12,390 to enhance predictive analytics for customer spending behavior. 16 00:01:12,990 --> 00:01:19,560 However, an incident in 2021 tested the company's preparedness and response to third party risks. 17 00:01:20,970 --> 00:01:27,240 One morning, Innovate X's risk officer, David noticed unusual activity in the company's data logs. 18 00:01:27,750 --> 00:01:33,450 A deeper investigation revealed that a data breach had occurred, exposing sensitive customer information. 19 00:01:34,290 --> 00:01:40,110 Immediately, a crisis meeting was called involving key stakeholders, including Sara David, the Chief 20 00:01:40,110 --> 00:01:44,280 Information Security Officer, Emma and the legal team led by Carlos. 21 00:01:44,760 --> 00:01:48,630 The breach was traced back to Data Ocean's compromised security protocols. 22 00:01:48,630 --> 00:01:52,020 The team had to quickly address several critical questions. 23 00:01:52,230 --> 00:01:57,930 How could innovate X ensure that their data providers adhered to stringent data protection standards? 24 00:01:58,140 --> 00:02:03,810 What mechanisms should be in place to verify compliance with regulations like the General Data Protection 25 00:02:03,810 --> 00:02:04,770 Regulation? 26 00:02:07,020 --> 00:02:13,020 David proposed a more rigorous vetting process for third party data providers, including detailed security 27 00:02:13,020 --> 00:02:14,910 audits and compliance checks. 28 00:02:15,570 --> 00:02:21,690 Furthermore, integrating contractual clauses obligating vendors to adhere to privacy regulations became 29 00:02:21,690 --> 00:02:22,800 non-negotiable. 30 00:02:23,460 --> 00:02:29,490 Emma suggested implementing continuous vulnerability assessments and penetration tests to proactively 31 00:02:29,490 --> 00:02:32,400 identify and mitigate potential security gaps. 32 00:02:33,270 --> 00:02:38,730 This approach acknowledged that despite the initial vetting, ongoing monitoring is crucial to managing 33 00:02:38,730 --> 00:02:40,050 dynamic risks. 34 00:02:41,040 --> 00:02:46,830 The incident also prompted innovate ECS to re-evaluate the ethical implications of their AI systems. 35 00:02:47,190 --> 00:02:52,560 During the breach investigation, it was discovered that the historical data used for developing predictive 36 00:02:52,560 --> 00:02:57,430 models contained inherent biases, particularly against minority groups. 37 00:02:57,640 --> 00:03:01,690 This revelation raised another critical question how can innovate? 38 00:03:01,900 --> 00:03:05,260 Ensure the fairness and ethical integrity of third party. 39 00:03:05,290 --> 00:03:06,940 Datasets and algorithms. 40 00:03:07,870 --> 00:03:13,540 Sarah emphasized the need for bias audits and stakeholder engagement to foster transparency. 41 00:03:13,900 --> 00:03:19,450 David suggested implementing fairness metrics to evaluate algorithmic outcomes continually. 42 00:03:20,200 --> 00:03:22,630 The situation recalled the Obermaier et al. 43 00:03:22,660 --> 00:03:27,610 Study, where biased algorithms in health care led to racial disparities. 44 00:03:27,910 --> 00:03:28,660 Innovate EQS. 45 00:03:28,660 --> 00:03:35,410 Data scientists led by Pria were tasked with conducting a comprehensive bias audit of all third party 46 00:03:35,440 --> 00:03:37,030 datasets and algorithms. 47 00:03:37,330 --> 00:03:42,850 They identified biased patterns and introduced corrective measures such as rebalancing datasets and 48 00:03:42,850 --> 00:03:45,790 incorporating fairness constraints in model training. 49 00:03:46,330 --> 00:03:52,000 Collaborating with diverse stakeholder groups, including customer advocacy organizations, provided 50 00:03:52,000 --> 00:03:57,440 valuable insights and reinforced the company's commitment to equitable AI deployment. 51 00:03:58,280 --> 00:04:03,980 Another dimension of third party risk management at innovate X involved regulatory compliance. 52 00:04:04,370 --> 00:04:09,950 The breach incident emphasized the importance of ensuring third party partners adherence to relevant 53 00:04:09,980 --> 00:04:11,150 legal frameworks. 54 00:04:11,480 --> 00:04:17,900 Carlos, the legal head, pointed out the potential for significant fines under GDPR for non-compliance. 55 00:04:18,050 --> 00:04:24,260 He advocated for integrating regulatory requirements into all third party contracts and conducting regular 56 00:04:24,260 --> 00:04:25,610 compliance audits. 57 00:04:26,090 --> 00:04:32,720 This raised a pertinent question what role does regulatory compliance play in third party risk management? 58 00:04:33,500 --> 00:04:39,620 To address this, innovate X developed a comprehensive compliance check protocol that included periodic 59 00:04:39,620 --> 00:04:45,860 audits, mandatory training for employees on data protection laws, and real time monitoring of regulatory 60 00:04:45,860 --> 00:04:46,580 changes. 61 00:04:46,610 --> 00:04:52,310 This proactive stance ensured that innovate X stayed ahead of legal developments, mitigating the risk 62 00:04:52,310 --> 00:04:53,870 of Noncompliance. 63 00:04:55,280 --> 00:04:59,450 Intellectual property rights management surfaced as another critical area. 64 00:04:59,810 --> 00:05:04,610 Innovate X utilized several third party algorithms and software solutions. 65 00:05:04,670 --> 00:05:09,440 Unauthorized use of these could lead to legal disputes and financial repercussions. 66 00:05:10,010 --> 00:05:16,160 The World Intellectual Property Organization report noted a surge in AI related patent applications, 67 00:05:16,160 --> 00:05:20,000 emphasizing the growing importance of IP in the AI domain. 68 00:05:20,390 --> 00:05:26,390 Carlos, with his legal team, conducted robust IP due diligence to secure necessary licenses and permissions 69 00:05:26,390 --> 00:05:28,910 before integrating third party components. 70 00:05:29,240 --> 00:05:35,210 This highlighted the question how can organizations safeguard against IP infringements when using third 71 00:05:35,240 --> 00:05:36,920 party AI components? 72 00:05:38,420 --> 00:05:44,900 Innovate X's approach involved engaging external IP experts to navigate complex patent landscapes and 73 00:05:44,900 --> 00:05:52,110 implementing a centralized IP management system to track licenses and usage rights, meticulously Establishing 74 00:05:52,110 --> 00:05:57,000 clear governance structures was essential to overseeing third party risk management. 75 00:05:57,420 --> 00:06:03,060 Sarah appointed a dedicated risk management team with well-defined roles and responsibilities. 76 00:06:03,270 --> 00:06:09,390 This team conducted periodic reviews of third party relationships assessing associated risks. 77 00:06:09,870 --> 00:06:16,200 Innovate X embraced AI powered risk management platforms, providing real time insights into potential 78 00:06:16,200 --> 00:06:16,950 risks. 79 00:06:17,490 --> 00:06:23,310 This technological solution allowed the risk management team to respond proactively to emerging threats. 80 00:06:23,550 --> 00:06:29,100 The team's efficacy raised the question what impact do governance structures have on effective third 81 00:06:29,100 --> 00:06:30,450 party risk management? 82 00:06:31,830 --> 00:06:37,530 Training and awareness programs form the cornerstone of Innovate X's risk management strategy. 83 00:06:38,280 --> 00:06:43,560 Employees were educated on the potential risks associated with third party components through regular 84 00:06:43,560 --> 00:06:47,040 training sessions, workshops, and educational materials. 85 00:06:47,550 --> 00:06:51,880 This fostered a risk aware culture, enhancing overall resilience. 86 00:06:52,270 --> 00:06:57,640 Emma's training program included simulations of breach scenarios, reinforcing the protocols and best 87 00:06:57,640 --> 00:06:58,570 practices. 88 00:06:59,830 --> 00:07:05,920 Continuous monitoring and improvement underscored Innovate X's commitment to dynamic risk management. 89 00:07:06,310 --> 00:07:12,340 Given the evolving threat landscape, David advocated for leveraging AI and machine learning tools to 90 00:07:12,370 --> 00:07:15,700 detect anomalies and conduct regular risk assessments. 91 00:07:16,480 --> 00:07:22,090 Staying informed about the latest developments in AI governance ensured that Innovate X's risk management 92 00:07:22,090 --> 00:07:23,980 strategies remained effective. 93 00:07:25,690 --> 00:07:31,690 The proactive steps taken by innovate X to manage third party risks provided valuable insights for other 94 00:07:31,690 --> 00:07:32,950 organizations. 95 00:07:32,980 --> 00:07:39,460 By focusing on data privacy, security, ethical considerations, regulatory compliance, intellectual 96 00:07:39,460 --> 00:07:45,280 property governance structures, training, and continuous monitoring, innovate X created a robust 97 00:07:45,280 --> 00:07:47,950 framework for managing third party risks. 98 00:07:48,490 --> 00:07:53,200 The incident with Data Ocean, while challenging, ultimately strengthened the company's risk management 99 00:07:53,200 --> 00:07:59,470 protocols and reinforced the critical role of a comprehensive and proactive approach in AI governance. 100 00:08:01,750 --> 00:08:07,570 In conclusion, Innovate X's experience underscores the multifaceted nature of managing third party 101 00:08:07,570 --> 00:08:15,040 risks in AI systems by addressing data privacy through stringent vetting and compliance checks, mitigating 102 00:08:15,040 --> 00:08:20,800 security vulnerabilities with rigorous assessments, ensuring ethical integrity through bias audits, 103 00:08:20,800 --> 00:08:23,020 and maintaining regulatory compliance. 104 00:08:23,050 --> 00:08:27,250 Innovate X exemplified a holistic approach to risk management. 105 00:08:27,640 --> 00:08:33,130 The focus on intellectual property rights, governance structures, and continuous improvement further 106 00:08:33,130 --> 00:08:34,690 solidified their framework. 107 00:08:35,290 --> 00:08:41,650 As AI technologies evolve, the principles demonstrated by innovate X will remain vital for organizations 108 00:08:41,650 --> 00:08:47,620 aiming to deploy AI ethically and securely, fostering trust and confidence among stakeholders.