Major Fortune 500 Companies See AI As Potential Risk: Study

Artificial intelligence or AI, mainly more popular generative AI, is being considered as a potential risk factor by majority of Fortune 500 companies, according to a report from research firm Arize AI.

The survey of major U.S. corporations’ annual reports, “The Rise of Generative AI in SEC Filings” indicates that 281 companies among the total 500 now see that AI holds many risk factors, such as failing to keep pace with competitors or achieve AI goals, general harms, regulatory risk as well as security risks.

The given number represents 56.2 percent of the Fortune 500 companies, a 473.5 percent surge from the 49 companies that highlighted AI risks in 2022. In comparison, a good number of companies whose annual financial reports were filed in 2012 considered cyber and information security as a risk factor after many large enterprises, such as Citi, Google, Lockheed Martin, Sony, and others, all reported major data breaches in 2011.

In the latest study, around 64.6 percent among the 500 companies mention AI in their most recent annual report, while generative AI is being specifically mentioned by one in five enterprises.

Meanwhile, only 30.6 percent of companies that mention generative AI in their annual reports cite its benefits or use outside of the risk factor section.

The report by the research platform said, “If annual reports of the Fortune 500 make one thing clear, it’s that the impact of generative AI is being felt across a wide array of industries – even those not yet embracing the technology.”

Worldwide, the number of companies that consider AI as a necessary part of their regular reporting on business results is skyrocketing.

The generative AI revolution, from speeding up drug discovery to reducing time-to-merge for software engineers, is rapidly reshaping industries, the study noted.

For the report, Arize reviewed the most recent annual financial reports, as of May 1, 2024, of U.S.-based Fortune 500 companies to find out how major companies communicate the benefits, risks, and overall impact of AI, and compared with the same from the year 2022.

The study searched for terms like AI, machine learning, large language models, generative AI, and more.

As per the study, media and entertainment, financial services, and software and technology companies lead all other industries in disclosing risks from AI. Software and technology companies, as expected, lead in terms of raw number of mentions of generative AI and large language models.

Meanwhile, more than any other industry, 91.7 percent of advertising, media, and entertainment companies cite AI as a risk factor to their businesses.

The research points out that the reasons generative AI is cited as a risk factor generally fall into four categories.

The companies are concerned about failing to keep pace with competitors or achieve AI goals.

According to streaming media major Netflix, “New technological developments, including the development and use of generative artificial intelligence, are rapidly evolving. If our competitors gain an advantage by using such technologies, our ability to compete effectively and our results of operations could be adversely impacted.”

Some companies are worried about general harms such as physical, reputational, or other harms to company or its stakeholders from AI – often touching on AI fairness or responsible use of AI.

Telecom equipment major Motorola Solutions, Inc. pointed out that AI may not always operate as intended, and datasets may be insufficient or contain illegal, biased, harmful or offensive information, which could negatively impact its results of operations, business reputation or customers’ acceptance of its AI offerings.

Further, there is risk of regulation of AI upending data pipelines or business lines relying on ML models.

Entertainment giant Disney noted that rules governing new technological developments such as developments in generative AI, remain unsettled, and these developments may affect aspects of its existing business model, including revenue streams for the use of its IP and how entertainment products are created.

The potential AI risks also include data leakage or heightened cybersecurity risks.

“Given that most mentions of AI are as a risk factor, there is a real opportunity for enterprises to stand out by highlighting their innovation and providing context on how they are using generative AI,” the report stated.

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