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Digital Foundation , Endless Possibilities

Adil Buhariwalla, Partner Internal Audit & Risk Consulting

April 17, 2019

“The AI IA” – Artificially Intelligent Internal Auditor

IIA Gulf Regional Audit ConferenceAbu Dhabi, 16th to 18th April 2019

Crowe Mak, UAE(Member Firm of Crowe Global)

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Agenda

• Naturally Intelligent Internal Auditor

• Artificial Intelligence

• Artificially Intelligent Internal Auditor

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NATURALLY INTELLIGENT INTERNAL AUDITOR

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The traits of a “Naturally Intelligent” Internal Auditor

• Risk-based orientation• Governance expertise• Global perspective• Business acumen • Superb communicator (Written & Oral communication, Presentation skills)• Impactful presence• Collaborative• Technologically adept (CAATS, Flowcharting, Risk Mapping Tools, etc.)• Creative and analytical thinking, and problem solving• Strong ethical compass• Outstanding recruiter, manager and developer of talent• Relationship expert (Interpersonal skills)• Unquestioned leadership ability

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ARTIFICIAL INTELLIGENCE

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The birth of Artificial Intelligence??

1950 TURING TEST: Computer scientist Alan Turing proposed a test for machine intelligence

If a machine can trick humans into thinking it is human, then it has intelligence

1955: The term 'artificial intelligence’ was coined by computer scientist, John McCarthy to describe

“the science and engineering of making intelligent machines”

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Definition of Artificial Intelligence

Artificial intelligence is a branch of computer science which is based on the understanding that the process of human

intellect can be mechanized

• ability to learn• use language to communicate• experience and think• develop feelings• form concepts

• understand• apply logic and

reasoning• develop capacities to

recognize patterns• comprehend ideas

• plan• solve problems• make decisions• retain information

HUMAN INTELLECT

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Artificial Intelligence – different names

• Informatics•Machine learning•Knowledge-based systems•Cognitive systems•Intelligent systems•Intelligent agents•Computational intelligence

The new names help to procure funding by avoiding the stigma of false promises attached to the name "artificial intelligence"

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ARTIFICIAL INTELLIGENCE IN TODAY’S WORLD

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Today’s world of Artificial Intelligence

A. “AI, Sky High” - those who cannot stop praising its virtues

B. “AI, Oh My!” - those who paint doomsday scenarios about the –ve outcomes of AI

C.“AI, A Big Lie!” - those who are sceptical about the usefulness of AI

D. “AI, Please Clarify” -those who don’t know enough about AI to decide one way or another about it

AI

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A. “AI, Sky High”

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Group ‘A’ – “AI, Sky High”…. a few examples

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Group ‘A’ – AI, Reach for the Sky….

Product Try-OnInstantly try on eye, lip and cheek make-up

Visual Artists

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Capabilities of AI

Does not need to sleep, rest or take breaks

Can organize and manage

Can interact with humans

Can think logically without emotions, with less or no mistakes

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B. “AI, Oh My!”

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Group ‘B’ – “AI, Oh My!”

What if, AI is programmed to do something devastating!

What if, AI is programmed to do something beneficial, but it develops a destructive method for achieving its goal

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Group ‘B’ – “AI, Oh My!”....

We humans control our planet, not because we’re the strongest, fastest or biggest, but because we’re the smartest

If we’re no longer the smartest, are we assured to remain in control

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Group ‘B’ – AI, Oh My! …..

Customer privacy and Security of AI systems

Large-scale job losses

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“Jobs Available, Humans Need Not Apply”

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Share of stable, new and redundant roles, 2018 vs. 2022 (projected)

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• Managing Directors and Chief Executives

• General and Operations Managers*• Software and Applications Developers

and Analysts*• Data Analysts and Scientists*• Sales and Marketing Professionals*• Human Resources Specialists• Risk Management Specialists• Financial and Investment Advisers• Database and Network Professionals• Supply Chain and Logistics Specialists

• Information Security Analysts*• Organizational Development

Specialists*• Chemical Processing Plant

Operators• University and Higher Education

Teachers• Compliance Officers• Energy and Petroleum Engineers• Robotics Specialists and Engineers• Petroleum and Natural Gas Refining

Plant Operators

Examples of Stable Roles

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• Data Analysts and Scientists*• AI and Machine Learning Specialists• General and Operations Managers*• Big Data Specialists• Digital Transformation Specialists• Sales and Marketing Professionals*• New Technology Specialists• Organizational Development

Specialists*• Software and Applications Developers

and Analysts*• Information Technology Services• Process Automation Specialists• Innovation Professionals

• Information Security Analysts*• Ecommerce and Social Media

Specialists• User Experience and Human-

Machine Interaction Designers• Training and Development

Specialists• Robotics Specialists and Engineers• People and Culture Specialists• Client Information and Customer

Service Workers*• Service and Solutions Designers• Digital Marketing and Strategy

Specialists

Examples of New Roles

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• Data Entry Clerks• Accounting, Bookkeeping and Payroll

Clerks• Admin. & Executive Secretaries• Assembly and Factory Workers• Customer Service Workers*• Business Svcs. & Admin. Managers• Accountants and Auditors• Material-Recording and Stock-

Keeping Clerks• General and Operations Managers*• Postal Service Clerks• Financial Analysts• Cashiers and Ticket Clerks

• Mechanics and Machinery Repairers• Telemarketers• Electronics and Telecommunications

Installers and Repairers• Bank Tellers and Related Clerks• Car, Van and Motorcycle Drivers• Sales and Purchasing Agents and

Brokers• Door-To-Door Sales Workers, News

and Street Vendors, and Related Workers

• Statistical, Finance and Insurance Clerks

• Lawyers ??

Examples of Redundant Roles

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Shifting Skill Needs within MENA Region

89% Looking to automate the work

84% Hire new permanent staff with skills relevant to technologies

76% Retain Existing Employees

73% Expect existing employees to pick-up skills on the job

72% Hire new temporary staff with skills relevant to new technologies

69% Outsource some business functions to external contractors

56% Hire freelancers with skills relevant to new technologies

53% Strategic redundancies of staff who lack skills to use new technologies

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Ratio of Human to Machine Hours: 2018 vs. 2022 (projected)

Reasoning and decision-making

Coordinating, developing, managing, advising

Communicating & Interacting

Administering

Performing physical/manual work activities

Identifying & Evaluating job-related information

Performing technical and complex activities

Looking for & receiving job related information

Information and data processing

Human Machine Human Machine2018 2022

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C.“AI, A Big Lie!”

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Group ‘C’ – “AI, A Big Lie!”

• Potential lack of transparency

• High implementation costs

• Lengthy implementation times

• Ethical aspects of replicating human intelligence

• Integration challenges and lack of understanding of the state-of-the-art systems

• Usability and interoperability with other systems and platforms

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Group ‘C’ – “AI, A Big Lie!”….

• AI is only as good as the data that is fed into it

• Data could be biased because of human prejudices

• AI is only as smart as the algorithms developed by the programmer. Singularity or Superintelligence is still a fictional concept

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Group ‘C’ – “AI, A Big Lie!”….

AI does not, and cannot have any concept of “fairness". It only knows data. And the idea of what is fair differs from society to society

Human thinking is guided by emotions, which are totally lacking in AI

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D.“AI, Please Clarify

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Group ‘D’ – “AI, Please Clarify”

• What is AI – Clarified

• General Pros, Cons and Cautions – Clarified

• Next Step – Putting Artificial Intelligence into Perspective• The AI IA

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Putting AI knowledge into Perspective for IA

The most feared risk of AI

Job Losses

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The Most feared risk of AI – relevant to IA

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The Most feared risk of AI – relevant to IA

Internal Auditor

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Probability of job loss by-profession

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And the probability is…..

True, if we do not EVOLVE

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Technological Evolution

• AI is just yet another extension of technological evolution

• The objective of technological evolution has only been to help humans work smartly, safely, accurately, more productively, etc. – not harm them

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Technological Evolution

AI is not the culprit for Job Redundancies;

Inertia to technical evolution is

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The Key to Survival for IAs in the age of AI

BeAn Artificially Intelligent

Internal Auditor

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What is it to be an AI IA?

A Naturally Intelligent IA who learns to co-exist with AI

An IA who EVOLVES by inheriting technological variations through Awareness and Adapting

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Awareness & Adapting

Awareness: Self and the Organization, about AI

Adapting: Leveraging awareness of AI, to add value and improve an organization’s operations

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IA’s Bread & Butter?

Add value and improve an organization’s operations through systematic, disciplined

methods to evaluate and improve the effectiveness of risk management, control, and governance processes

AI automated

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How Can IAs Add Value Through AI

Help to keep the organization in pace with:• understanding and managing AI associated risks, • achieving expected results from AI automation, and • continuing to innovate

How?• Assisting in Integrating governance, risk and controls throughout the AI

automation program life cycle• Identifying opportunities to embed AI automation-enabled control activities• Capitalizing on intelligent automation innovations to increase the efficiency and

effectiveness of our (Internal Audit’s) own activities

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Assess and advise management on the impact of AI initiatives in terms of Risks & Opportunities

Identify AI automated controls for monitoring, compliance with laws, rules, regulations, policies & procedures, and risk management measures

Identify AI applications to deliver cost-effective, improved quality, smart services to clients

IA Adding Value thru’ AI

Own and manage risks

Oversee risksProvide Independent Assurance

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Awareness of AI for IA

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The risk that:• unidentified human biases imbedded in the AI technology• human logic errors will be imbedded in the AI technology• AI products and services may cause harm, resulting in financial and/or

reputational damage• customers or other stakeholders will not accept or adopt the organization’s AI

initiatives• the organization will lag behind the competition if it does not invest in AI • investment in AI (infrastructure, research and development, and talent acquisition)

will not yield an acceptable ROI

Awareness & Assessment of AI related risks

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AI automation for IA

• Robotics Process Automation (RPA): technology used to mimic repetitive human tasks with more precision and accuracy (e.g. Data gathering for analytics, Trend analysis and risk assessment)

• Enhanced Process Automation (EPA): technology with the ability to process unstructured data, build and use repositories of knowledge, and learn from experience (e.g. Knowledge based-systems (case-based) for fraud indicators, medical diagnosis, market trends, etc.)

• Cognitive Automation (CA): systems that combine artificial intelligence technology with data analytics for human decision-making, when there is voluminous data involved (e.g. Natural Language Processing, Digital virtual agents – automated customer services)

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The AI IA – Closing message

Gain Train Retain MaintainExplain

AI Knowledge

Management trust - Exhibit capability to apply knowledge and skills

Train yourself and team to apply knowledge

Knowledge and skills

Conduct AI knowledge awareness sessions for client and own team

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CPE CREDIT CODE 16991