White House Issues Executive Order to “Seize thePromise and Manage the Risks” of AI
November 1,2023

In his first executive order (EO) on artificial intelligence (AI), President Biden is directing
various federal agencies to identify the risks of the technology as well as harness the benefits.
This is something to watch because the details will be important – regulatory and legislativechanges are coming.

Key Directives in the Executive Order
Among the key directives government agencies need to address, per the EO, are thefollowing:●Directing the development of new standards and rules across federal agencies●

Initiating action to address the most concerning implications of the broad adoptionof AI in public and private sectors●

Catalyzing research and assistance across impacted ecosystems●

Calling on Congress to pass a Federal Privacy Bill●

Aligning with other global actions (G7, European Union Artificial Intelligence Act,etc.)

Numerous Questions Remain
Despite efforts to be as comprehensive as possible, the EO raises several questions that willneed to be addressed before businesses can fully determine the impact that forthcoming EO
implementation may have.
●How is “safety” defined and by whom?

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How will AI developers and users demonstrate that models are free of discrimination
and bias?

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How will small- to medium-sized businesses navigate the new rules and regulations(domestic and international) given the “moat” that may already exist around big techplayers?

●How do forthcoming standards apply to AI solutions already in use versus newly
developed ones?

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How will this impact the balance between regulation and free speech?

There are other concerns that business leaders need to be aware of; for example, how theopen-source community and those that leverage open-source AI tools and models will beimpacted. A significant open-source presence already exists with no single corporate entity
responsible for development. Currently, more than 225 transformer models (the architecture
behind the wildly popular ChatGPT) are available on the popular open-source AIcommunity, HuggingFace, with more to come. These models are also being made widely
available through hyperscalers such as AWS and GCP.

Key Takeaways and Concerns●Standardization is key: The initiative’s ultimate success will depend on the abilityof a multitude of agencies to put in place essential definitions, guardrails andregulations necessary to provide sufficient guidance to enable the power of AI whilenavigating both known and unknown risks. New AI safety and security standards will
be developed for powerful AI systems, intended to apply to certain models that posea serious risk to national security, national economic security, or national health andsafety.

●Definition of safe: The EO directs NIST to develop standards, tools and tests forsafe systems. However, there remains a lack of specific guidance on what constitutes
a safe system, and the directive fails to distinguish between the risks presented by AI
software and the combination of AI software and hardware.

●Safety testing: The developers of these powerful AI systems may be required toshare critical information with the federal government; specifically, “developers offoundation models must share the results of all red-team safety tests.” Traditionally,
red-team safety tests focus on manipulating a model (through simulated adversarialattacks), not necessarily on whether the model is inherently biased, safe orresponsible. As noted above, those determinations depend on standardized
definitions and evaluation mechanisms.

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●AI-generated content labeling: To address fraudulent and deceptive uses of AI,
the EO directs the Department of Commerce to develop standards and best practices
for detecting and authenticating official content, including watermarks to distinctly
label AI-generated content. This proactive measure could be a powerful tool in
distinguishing between content created by humans and that produced by AI;
however, technology to detect AI-generated content is still a work in progress. As ofJuly 20, 2023, OpenAI revoked its technology intended to detect AI-written text andstated that its “AI classifier is no longer available due to its low rate of accuracy.”●

Federal privacy law: The EO calls on Congress to pass bipartisan privacy
legislation to protect all citizens and asserts that federal support and thedevelopment of privacy-preserving technology should be prioritized. It alsoestablishes a new “Research Coordination Network” to advance rapid breakthroughsin privacy. As AI technology continues to evolve, the EO turns the privacy lens on thegovernment by directing an evaluation of how agencies collect and use commerciallyavailable information and personally identifiable data. Privacy serves as a doubleedged sword for AI – large amounts of data (which may include sensitiveinformation) may be required to train models, which may represent risk toindividuals’ personal data.

●Mitigating bias: The EO directs government agencies to take steps to address
algorithmic bias and discrimination related to AI systems, calling for thedevelopment of guidance and best practices for mitigating algorithmicdiscrimination, ensuring AI systems comply with civil rights laws, conducting
evaluations to detect unjust impacts on protected groups, and granting humanconsideration for adverse decisions made by AI systems. It further directs theDepartment of Justice to coordinate civil rights enforcement regarding AI
discrimination. Also of note, the EO encourages the Director of the Federal Housing
Finance Agency and the Director of the Consumer Financial Protection Bureau toconsider using their authorities to use appropriate methodologies, including AI tools,
to ensure compliance with federal law. This includes evaluating their underwriting
models for bias or disparities affecting protected groups and evaluating automatedcollateral valuation and appraisal processes.

These broad mandates underscore the federal government’s determination to protect core
national interests. An intriguing aspect of these proposed standards is their reliance onprotiviti.com

3existing agency enforcement. Unlike some other jurisdictions that have introduced specific
AI regulatory bodies, the standards do not create new enforcement agencies or mechanisms.

What Businesses Can Do to Prepare for Changes in the AI Regulatory
LandscapeWhile much work remains to be done before the EO has an appreciable impact on howbusinesses use AI, some preparatory steps will still prove beneficial for those developing anddeploying AI.
1. Establish an AI code of ethics aligning with your corporate ethics and mission.
2. Develop an inventory of AI/ML systems and a repository of algorithms, documenting
each model’s purpose, data sources, key parameters and business context.
3. Formalize an AI governance structure, including roles and responsibilities, and plansfor red teaming and auditing.
4. Evaluate AI products/services and uses against a standard framework such as theNIST AI Risk Management Framework.

Closing Thoughts
While the success of the EO is contingent on the development and execution of plans andpolicies by government agencies, the EO indicates there is growing public awareness of thepotential privacy, ethical and security challenges presented by AI and the need to address
those. Taking the suggested steps above will help businesses futureproof themselves forforthcoming regulations, and ultimately will help businesses better leverage the capabilitiesof AI.

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4About Protiviti
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