Risk Mitigation Strategies for Retailers Rolling Out AI Solutions

A brief overview of how companies are addressing the potential risks of AI applications in the retail sector.

Artificial intelligence (AI) is transforming the retail industry, offering new opportunities for enhancing customer experience, optimizing operations, and increasing revenue. However, AI also poses some challenges and risks, such as ethical, legal, and social implications, data privacy and security issues, and potential biases and errors in decision making. Therefore, companies need to adopt responsible and trustworthy AI practices, and implement effective measures to prevent and mitigate the problems that may arise from AI applications in retail.

Challenges of AI in Retail

Some of the main challenges that companies face when using AI in retail are:

  • Ensuring ethical and fair use of AI: AI systems may have unintentional or harmful consequences, such as discriminating against certain groups of customers, employees, or suppliers, or infringing on their rights and dignity. For example, facial recognition technology may be used to track customer behavior, preferences, and emotions, but it may also violate their privacy and consent, or generate inaccurate or biased results.
  • Protecting data privacy and securityAI systems rely on large amounts of data, which may be sensitive, personal, or confidential. Companies need to ensure that they collect, store, and process data in a secure and compliant manner, and respect the data rights and preferences of their stakeholders. For example, data breaches may expose customer or employee information, or compromise their trust and loyalty.
  • Ensuring quality and reliability of AI: AI datasets are the collections of data that are used to train, test, and deploy AI systems. They are essential for the performance, accuracy, and consistency of AI systems. However, AI datasets may also contain errors, bugs, or limitations that could affect the outcomes and actions of AI systems. Therefore, companies that use AI systems need to ensure that they follow best practices to test, monitor, and audit AI datasets and provide clear and transparent explanations and accountability for their AI systems.

Solutions for AI in Retail

Some of the best practices and solutions that retail companies can adopt to prevent and address the problems of AI in retail include:

  • Adopting ethical and human-centric AI principles and frameworks: Companies need to define and follow clear and consistent ethical and human-centric values and principles and align their AI strategies and goals with them. For example, companies can adopt the principles of fairness, transparency, accountability, privacy, and security, and ensure that their AI systems respect and promote the interests and well-being of their stakeholders. This is where BDO’s AI Governance framework can be applied.
  • Implementing data governance and data protection policies and practices: Data governance and data protection are essential for companies that collect, store, and use data from their customers, employees, or other sources. Companies need to establish and enforce policies and practices and ensure that they comply with the relevant laws and regulations. For example, companies can implement data protection and security measures, such as encryption, anonymization, and access control, and obtain informed and explicit consent from their data subjects.
  • Applying quality assurance and risk management methods and tools: To avoid harming users, customers, or the environment, companies need to adopt quality assurance and risk management practices for their AI systems. Companies need to apply quality assurance and risk management methods and tools and ensure that they monitor and evaluate their AI systems regularly and systematically. For example, companies can use testing, validation, verification, and auditing techniques, and employ human oversight and intervention mechanisms, to ensure that their AI systems are reliable, accurate, and robust.

BDO Insight

AI is a powerful and disruptive technology that can bring significant benefits to the retail industry, but it also poses some challenges and risks that need to be addressed. Companies need to adopt responsible and trustworthy AI practices and implement effective measures to prevent and mitigate the problems that may arise from AI applications in retail. By doing so, they can enhance their competitive advantage, reputation, and customer satisfaction, and ensure the long-term sustainability and success of their business.

Want to learn more? Explore our Future Proof Retail platform to learn more about AI in the retail industry.