Why AI Risk Assessment is Non-Negotiable ?

According to the new international standards (ISO/IEC 42001 & ISO/IEC 23894), treating AI like standard software is a recipe for disaster. Here is the breakdown of What AI Risk Assessment actually is and Why you need it now.

💡 WHY do we need it?

1. To Protect Value & Reputation (For the Boss) Risk management isn’t just about avoiding fines; it’s about the “creation and protection of value”. Demonstrating a commitment to responsible AI builds trust with stakeholders and customers, which is critical for adoption.

2. To Enable Responsible Innovation (For the Developer) You can’t innovate if you’re constantly fighting fires. AI systems change behavior through continuous learning. A solid risk framework helps you anticipate these changes so you can push boundaries safely.

3. Because AI Risks are Unique (For the IT Director) Standard IT controls don’t catch everything. AI brings new threats like “data poisoning,” “model stealing,” and “lack of explainability”. You need a specialized framework to distinguish acceptable vs. non-acceptable risks.

It is a core component of the AI Management System planning phase and is comprised of the following three distinct steps:

1. Risk Identification

The organization must find, recognize, and describe risks that could prevent it from achieving its AI objectives.+1

• Identification of Assets: This involves identifying tangible assets (e.g., data, models, the AI system itself) and intangible assets (e.g., reputation, trust, privacy of individuals) .
• Identification of Risk Sources: The organization must look for sources of risk in areas such as data quality, AI system configuration, hardware, lack of transparency, level of automation, and dependence on external parties.
• Events and Outcomes: The organization must identify potential events (e.g., data poisoning, model theft) and their outcomes that could result in consequences for the organization or stakeholders.

2. Risk Analysis

Once identified, the organization must understand the nature of the risk and determine the level of risk.

• Assessment of Consequences: Unlike traditional IT risk assessment, AI risk assessment requires analyzing impacts on three distinct groups:
  • The Organization: (e.g., financial loss, reputational damage, legal penalties).
  • Individuals: (e.g., impact on fundamental rights, privacy, safety, fairness, potential bias) .
  • Societies: (e.g., environmental impact, effects on democratic processes, amplification of discrimination) .
• Assessment of Likelihood: The organization must assess the realistic likelihood of these risks occurring, taking into account factors like the frequency of threats, internal motivations, and the effectiveness of existing controls .

3. Risk Evaluation

The purpose of evaluation is to support decision-making by comparing the results of the risk analysis against established risk criteria.

• Comparison: The organization compares the estimated level of risk against its predefined criteria for “acceptable” vs. “non-acceptable” risks.
• Prioritization: Risks are prioritized to determine which require treatment (mitigation).

Key Characteristics of AI Risk Assessment

• Integration with Impact Assessments: The standards explicitly link risk assessment to AI System Impact Assessment. The results of assessing impacts on individuals and societies must be considered as inputs into the broader risk assessment.
• Life Cycle Approach: Risk assessment should be aligned with the AI system life cycle. Different methods may apply to different stages (e.g., inception, design, verification, deployment).
• Iterative Process: Assessments must be performed at planned intervals, or whenever significant changes occur to the AI system or its context.
• Consistency: The process must be designed to produce consistent, valid, and comparable results when repeated.

Outputs

The output of the risk assessment process feeds directly into Risk Treatment (selecting controls to mitigate the risk) and the creation of a Statement of Applicability (justifying which controls are implemented).

Would you like me to explain the specific control objectives and controls recommended in Annex A for treating these identified risks?