Research published by credit rating firm Moody’s has found that generative AI (GenAI) has the potential to disrupt a number of industries, including legal and business services.
The research pulls in data from PwC, which shows that a quarter of CEOs expect to reduce headcount due to artificial intelligence (AI). Another report quoted in the Moody’s research from the International Monetary Fund (IMF) shows that AI could affect 40% of global employment, with advanced countries being worse hit than developing countries and emerging markets.
Although AI offers a way to improve business productivity and create new job opportunities, Moody’s predicts that in certain domains, requiring moderate-to-high education levels that do not involve face-to-face interactions, the transition will be harder to achieve.
The research, published in the company’s 2024 AI outlook report, notes that AI is still at an early stage of development and is unlikely to have a material effect on a company’s credit quality over the next year. The report’s authors note that growing AI spending, model improvement and edge computing will speed up AI adoption, which could lead to some firms suffering as models start competing.
In particular, the report’s authors note that off-the-shelf tools that can effortlessly create and analyse text could disrupt a few companies, mostly in the business and consumer services industry.
Moody’s believes legal services providers are most vulnerable to disruption. “AI tools can perform document reviews and other text-based services accurately and efficiently, which could make some of their law firm services redundant,” the report’s authors warned.
Business process outsourcing is another area that risks disruption due to advances in AI. According to Moody’s, companies that provide outsourced business services may lose revenue. AI reduces the number of employees required to serve clients, but Moody’s says these companies could adapt by shifting to technology services or functions requiring higher expertise.
While business model disruption will remain limited to a small number of sectors in 2024, Moody’s expects technology risk to increase as many organisations start rolling out AI applications at scale for the first time.
As companies begin collecting data to tailor AI applications to their needs, the report’s authors point out that they will face many difficulties, ranging from technical challenges to ethical concerns. “Given that AI models rely on the quality of the data used to calibrate them, insufficient data quality will degrade their output,” they warned.
While bias in the data that reflects racial, gender or socioeconomic discrimination can lead to substantial reputational damage, the report’s authors note that negative consequences have been limited so far.
Moody’s recognises that hackers will be able to make use of advances in AI to target attacks. It also believes that AI projects will compete with cyber security for funds, notably in organisations that do not allocate a separate budget for cyber defences. Organisations deploying AI may expose themselves to cyber attack if they do not correctly set up their IT systems. Moody’s warns that a lack of AI experience will amplify this risk.
The report’s authors also warn that the rapid expansion of cloud service infrastructure could heighten cyber risk. “Cloud platforms are highly complex and difficult to secure against all possible threats,” they said. “Although providers have improved the security of their AI services, their fast growth and the lack of skilled engineers make breaches more likely.”