As the Australian Government moves towards the formal regulation of artificial intelligence (AI), businesses should start to act now to ensure they will be compliant with emerging standards. And for the greater protection of their partners and customers.
A recent report from the Department of Industry, Science and Resources outlined mandatory principles for AI use and development, marking a shift from theoretical discussion to policy. With AI already transforming industries, this regulatory push is set to reshape how Australian companies operate and innovate.
Navigating this evolving regulatory landscape presents both challenges and opportunities. The government is currently considering three primary approaches: integrating AI regulations into existing laws, developing a comprehensive AI-specific framework, or adopting an overarching AI Act that spans multiple sectors. Each approach will require businesses to rethink how they incorporate AI into their operations.
While larger companies are generally better placed to adapt to regulatory changes, as they likely have the resources to easily adjust, smaller businesses could face significant operational disruptions unless they act now.
How to prepare
Here are some foundational steps businesses can take today to ensure they’re ready for the coming wave of AI regulation:
- Assess AI usage – conduct a thorough audit of how AI is being used across your business. This includes AI algorithms influencing customer decisions, internal automation systems, and third-party AI services. Individual employees may also be informally using AI for elements of their work without oversight. Identifying areas of potential risk now will help avoid non-compliance later.
- Establish transparency protocols – set up processes to provide transparency to developers and end-users. This involves documenting how AI systems work, detailing any potential biases, and ensuring that customers are aware of how AI is impacting their interactions with your business. Additionally, businesses will be obligated to ensure that AI-generated outputs can be detected as AI-generated. Earmarking development effort now to include disclosure and consent processes will save time and money in the future once the legislation is in place. Businesses should also establish processes that enable their employees to report AI-system failures to the Developers, who can then issue improvements to the model. In short, become familiar with the Developers of any AI-systems you employ, and with communicating with these Developers.
- Implement data governance policies – AI systems rely heavily on data, making it crucial to have strong data governance policies in place. This includes obtaining proper consents, securing data storage, and establishing protocols for data deletion and anonymisation. With a strict focus on transparency and personal control over your own personal information, businesses should get ahead of the curve and enact prudent, secure data governance policies now. In doing so, businesses can ensure that their customers, contractors, and staff become familiar with, and accustomed to, processes that are already aligned with the eventual regulations. Businesses that avoid the mad dash to become compliant once the regulations are finalised will experience far fewer disruptions to their existing workflows, client relations, and data governance processes. Further, forming healthy, company-wide policies will only benefit Australian businesses in becoming compliant not only with the upcoming AI regulations, but also the steadily approaching Privacy Act reforms.
- Engage legal expertise – stay ahead of the regulatory curve by engaging legal experts specialising in AI and privacy. Given the complexity of AI systems, businesses should ensure they understand the nuances of emerging laws and how to apply them to their operations. At Burch&Co we offer the services of people who are genuinely interested in the future of AI, with the members of our Commercial team being actively involved in the production of upcoming AI regulations, taking part in the discussions and contributing to the submissions that will form the final guidelines. We understand that data governance and cybersecurity can be a daunting subject to broach, and take pride in providing understandable, useful advice on privacy and AI. We are always available to draft fit-for-purpose contracts, protect our clients and their customer data, and provide advice to businesses so that they remain compliant with current and future privacy and AI regulations.
- Monitor regulatory updates – AI regulation is evolving rapidly, and businesses must stay informed. Monitoring updates from the Australian Government, industry bodies, and legal experts is essential to remain compliant and prepare for any new obligations.
The regulatory framework will likely apply to both AI developers and those deploying AI solutions. A key component of compliance will involve clear communication with end-users and maintaining meticulous records of AI usage. This ensures accountability and provides an audit trail should any concerns arise regarding AI decision-making or biases.
Penalties and ethical implications
One of the driving forces behind this type of regulation is the potential harm unregulated AI can cause to individuals and society. Misuse of AI, particularly in areas like automated decision-making and data privacy, could lead to serious penalties under upcoming legislation. Furthermore, the ethical implications of AI, from bias in hiring algorithms to decision-making in health or financial services, highlight the need for proactive governance.
As AI continues to permeate every industry, businesses must prioritise ethical AI use to build trust with customers and stakeholders alike.
Businesses that take proactive steps now will be better placed to navigate the complex regulatory environment that is quickly taking shape. Starting by focusing on transparency, accountability, and legal compliance, businesses can ensure they are prepared for the future while fostering innovation in a responsible manner.
This isn’t just about avoiding fines; it’s about shaping the future of Australian business in an AI-driven world.
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