London, 11 July 2019: The use of Artificial Intelligence (AI) in corporate finance creates substantial risk of abuses – but the solutions exist to ensure processes remain ethical and trustworthy, according to a world-first report from Drooms, Europe’s leading provider of secure cloud solutions, and ICAEW – the Institute of Chartered Accountants in England & Wales.
The report, entitled AI in Corporate Advisory, reveals that decision-making may soon be taken away from humans and guided instead by the application of AI in many stages of deal processes, including those in industries such as real estate, law and private equity. It examines the opportunities and risks of using AI for those involved in corporate finance transactions and how AI technologies will augment the existing business models of advisory firms.
While the report says that new regulatory measures for AI in corporate advisory are unnecessary because these already exist in sufficient quantity, it recommends that professional bodies should include the potential adaptation and/or extension of professional principles to include AI and big data.
Alexandre Grellier, co-founder and Chief Executive Officer of Drooms, commented: “The development of ethical principles and codes of practice is an important recommendation in the report. AI should be lawful, ethical and robust. “AI is still at an early stage of development and the importance of the partnerships between industry and technology firms in ensuring it is developed properly cannot be underlined enough, especially in ensuring people and commercial related data is not mis-used. “Such information must be handled in a transparent and understandable way. The good news is that we are developing algorithms to such a point that they match professional ethical values.”
Drooms aims to fulfil the key requirements for trustworthy and ethical AI by considering privacy and data governance, and human oversight. For example, it always keeps a human in the loop to confirm suggestions generated by AI to ensure quality of results and accountability, and it builds tools to help people be more efficient and effective, not to replace them by building fully automated systems. Drooms also takes into account guiding principles for designing intelligent solutions i.e. aiming at responsibility, explainability, accuracy, auditability and fairness.
Alexandre Grellier added: “The role of Virtual Data Rooms has already expanded immeasurably from two decades ago, when they were just an online replica of the physical spaces used by professionals carrying out due diligence, to having now become very secure online platforms for many aspects of the deal process and automated workflows e.g. findings, translations and auto-allocation in terms of AI.”
The AI in Corporate Advisory report says that AI-based technologies will have a marked impact on the global M&A market over the next decade. Experts interviewed for the report rated, on average, the likely significance of AI for corporate transactions as 9/10 – but their own organisations’ current level of AI adoption in corporate advisory as only 4/10, while they rated their clients’ levels of adoption for corporate transactions as just 3/10.
However, given that comprehensive, multi-layered analysis can produce complex results that require careful interpretation, the report concluded that professional judgement would become even more, rather than less, important in the age of AI.
David Petrie, Head of Corporate Finance, ICAEW, said: “For professional bodies, such as ICAEW, our role is to ensure that members remain at the cutting edge of the application of these new technologies and that they have the expertise, training and qualifications to make the commercial and ethical judgements vital in the brave new world of AI assisted deal-doing and corporate finance.”