Compliance Risk
The potential for legal or regulatory sanctions, financial loss, or reputational damage an organization faces when it fails to comply with laws, regulations, or prescribed practices.
Definition
In AI contexts, compliance risk covers data-privacy breaches (GDPR, HIPAA), biased outcomes violating equality laws, and inadequate audit trails. Managing this risk involves mapping regulations to AI processes, embedding controls (e.g., consent management, redaction), and maintaining documentation that proves adherence throughout the AI lifecycle.
Real-World Example
A fintech startup identifies compliance risk in its credit-scoring AI: GDPR requires explicit consent for data use. They build a consent widget into their app, log user permissions, and automatically exclude non-consenting profiles from scoring to avoid sanctions and fines.
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