Dividend.com

Artificial intelligence makes decisions using complex neural networks, genetic algorithms and other techniques. While these strategies tend to produce better results, their sheer complexity makes it difficult to understand what's happening under the hood. The "black box" algorithms may include inherent biases or be unprepared to cope with "black swan" events. Artificial intelligence also requires an extensive use of technology in general, which can increase a firm's risk exposure. One example would be a cybersecurity breach that exposes sensitive data, but other examples might include data loss that impacts the efficacy of AI algorithms or the loss of an algorithm to a competitor that hurts a firm's competitive edge.