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ACCA Strategic Professional · Strategic Business Leader · Machine learning, AI and robotics

Halden Logistics uses a deep neural network to set delivery prices. The board is told the model is highly accurate, but engineers cannot explain why it quotes particular prices, and a regulator has asked the company to justify individual quotes to customers. Which is the most appropriate governance response?

Halden should require explainability, using interpretable models or explanation tools, and retain human review of contested decisions. The problem is opacity against a duty to justify outcomes; high accuracy does not supply reasons, and the board remains accountable even if a vendor supplied the model.

  1. ARely on the model's overall accuracy, since accuracy satisfies any explanation requirement
  2. BRemove human oversight so that pricing is consistent and free of subjective influence
  3. CRequire explainability measures, such as interpretable models or documented explanation tools, and keep human review of contested decisionsCorrect
  4. DHand responsibility for the pricing outcomes to the software vendor through the contract

Explanation

The issue is the black-box nature of the model against a duty to justify decisions. Governance should secure explainability and human accountability for contested outcomes. Accuracy alone does not give explanations, and accountability cannot be wholly outsourced to a vendor.

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