The path to AI compliance: Navigating regulation with contract intelligence

By Monish Darda, Co-Founder and CTO, Icertis

For the last six years, Amazon Fresh has been developing its “Just Walk Out” concept, reimagining how consumers shop and pay for goods. However, amidst concerns about extensive human surveillance and because the underlying technology did not work reliably enough, Amazon announced in April that it would discontinue this initiative.

Had Amazon Fresh integrated generative AI (GenAI) as it is evolving now, the venture might have continued, benefiting from GenAI’s ability to contextually understand and process diverse types of content – multi-modal GenAI can be incredibly powerful. As the use of GenAI grows, India, with its robust IT infrastructure and extensive talent pool, is exceptionally positioned to lead this change. India alone is home to 50-70% of the global technology and operations workforce and boasts the third-largest SaaS ecosystem in the world. These factors uniquely position India not only to leverage GenAI effectively but also ensure it is implemented ethically and responsibly.

In May, the EU approved the world’s first-ever AI legislation, a significant step toward addressing growing concerns about the long-term effects of AI on the workforce and economy. Similarly, India is taking steps to regulate AI’s impact. The Ministry of Electronics and Information Technology continues to conduct reports on the safe development and use of AI. Moreover, The Bureau of Indian Standards has established a committee to propose new AI standards.

For enterprises, the challenge now extends beyond innovation to include critical considerations like the ethical use of AI, personal privacy, and data security requirements. Companies will need to ensure the AI systems that are developed in collaboration with or provided by third-party vendors also meet EU standards on how AI models are trained and tested. This is where AI-powered contract intelligence can play a critical role in helping companies ensure compliance and manage regulatory risk.

Contracts serve as the single source of truth for business relationships, documenting the responsibilities businesses have with customers, suppliers, and partners. Limited transparency into contracts, as well as a lack of connectivity between contract data and major operational systems, creates numerous non-compliance challenges. A recent study found that contract data within a large enterprise is spread across 24 different technology systems. When contracts are not streamlined or are improperly handled, businesses may struggle to comply with regulatory rules – resulting in penalties. This can impact efficiency and strategic outcomes across the business, which could lead to reputational and financial damage.

The AI Act will require organisations to redefine their contracts to include AI-related clauses that comply with new regulations. AI actually supports this effort by digesting thousands of contracts to quickly identify hidden risks. Contract intelligence can help organisations assess and manage the risks associated with AI by providing visibility across thousands of commercial agreements. This helps to understand the risk profile concerning data protection, AI ethics, and cross-border data flows, ensuring they meet compliance standards.

But that’s not all. Regulatory clauses in contracts need to be implemented – this is where the realisation of intent will come to play. Contract Intelligence can take compliance to the next level by validating if AI deployments adhere to contractual obligations. The current AI climate provides the perfect opportunity for legal departments to leverage contract intelligence in ways that demonstrate sustainable, effective, and compliant uses of AI.

The EU AI Act is structured to address various levels of risk associated with AI systems, from low to high risk. This structured approach to regulating AI can serve as a model for both policymakers and tech enterprises seeking to ensure compliance. For India, adhering to such frameworks is crucial as it continues to assert its leadership in the AI domain. Today, more than ever, demonstrating trust and transparency not only safeguards customers and their data but also enhances a company’s ability to meet the evolving market needs, and ensure its AI methodologies align with international regulatory standards.

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