What does the EU’s AI Act mean for your company?

The global business ecosystem must pay close attention to a game-changing new regulation: the European Union’s AI Act.

This wide-ranging directive is set to impact any business which is both operating in the EU and harnessing the power of artificial intelligence. And, as we saw with the General Data Protection Regulation (GDPR), is it almost certain to become a de facto international standard. 

“International organisations that want to do business in the EU must be prepared,” says Greg Hanson, GVP Platform Sales EMEA & LATAM at Informatica.

“This new compliance ask represents a significant change in the regulatory landscape, forcing businesses to make major adaptations to the processes that assess data clarity, accuracy, lineage and governance.”

EU’s AI Act puts data on a knife edge

The AI Act will direct businesses operating in the EU to establish full visibility of the origins of data used to build their AI models. Companies will be required to fully trace it through their data supply chain. 

Data quality must also be fully understood, which has become important given most organisations are deploying AI in some form to fuel their data processes and drive informed decision-making. 

“Accurate, trustworthy and timely data can give organisations that much needed competitive edge and drive organisational growth,” explains Hanson. “On the other hand, bad data leads to bad outcomes. If the information provided to leaders is poor, they are effectively navigating without an accurate map or the right instruments to guide their journey. 

“Without appropriate data controls, organisations risk making incorrect decisions in the short-term. In the long-term, it reduces the potential benefits of AI technologies.”

Hanson believes the EU’s decision to regulate the data feeding AI systems is a “smart” legislative move.

Despite additional complexity, the Act is set to push many organisations into taking concrete steps that will empower them to use data more effectively and protect its integrity. 

“Not only will it protect the potential of a technology that can fuel economic growth,” Hanson continues, “but it will protect the very essence of a business.”

Unlocking the data supply chain 

As the need for data accuracy, clarity and governance intensifies, businesses will need to adopt a policy of discipline and resilience.

While organisations will inevitably prefer to address this challenge using a single platform, Informatica’s recent survey of 600 global executives revealed half are using five or more tools to support data management priorities in 2023.

“There’s a very real risk that companies relying on multiple data management products will struggle with technical debt, interrupt the data supply chain and make compliance significantly more costly and time-consuming,” adds Hanson. 

“Organisations need to move away from manually documenting data in order to counter these challenges and seamlessly demonstrate compliance.”

Hanson says standardising data on a single data management platform underpinned by a metadata system of record will provide the required level of visibility. 

“This offers organisations synergy and simplicity – the ability to integrate data from multiple points and apply powerful AI principles, while ensuring the quality, governance and traceability of data is built into the data management principles.”

Adapting compliance processes

Changes introduced by the EU’s AI Act will not be immediate. In fact, it will likely be several years before controls, guardrails and responsibilities are in the right place to ensure compliance. 

And yet, while it may feel like they have plenty of time to prepare, companies are advised to get ahead and get ready for greater regulatory oversight. Increasing regulation is undoubtedly on the way as countries and regulators look for ways to manage the potential power and danger of AI.

“The introduction of the AI Act should spur organisations to reframe their data and AI strategies to ensure they are enabling the best possible outcomes,” Hanson says. “For any organisation that wants to truly benefit from AI and unlock better results, investment in data supply chains will be crucial moving forward.

“Although the legislation may not become legally binding until late 2023 or 2024,

organisations should get on the front foot and take proactive steps. Ultimately, inconsistent and poor data management results in poor business outcomes.

“Therefore, reducing the complexity of data management processes and tools that organisations rely on is a strong starting point. Standardising tools with a coherent data management platform – one that ensures traceability, governance and quality are baked into AI operations – will not only satisfy regulators’ initial demands, but also significantly improve business impact.”

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