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Artificial intelligence (AI) is transforming various industries and sectors, from healthcare and finance to education and entertainment. According to PwC’s Global Artificial Intelligence Study, the global AI market is expected to reach $15.7 trillion by 2030. As a result, many investors are eager to tap into the potential of AI and support innovative start-ups and scale-ups that are developing and deploying AI solutions.
However, investing in AI companies is not without challenges and risks, especially from a legal regulatory perspective. AI is a complex and dynamic field that raises various ethical, social and legal issues, such as data protection, privacy, security, bias, accountability, transparency and human rights. These issues are attracting increasing attention and scrutiny from regulators, policymakers, civil society and the public, who are demanding more responsible and trustworthy AI.
Therefore, investors need to be aware of the existing and emerging AI regulations that might affect their portfolio companies, as well as the potential liabilities and penalties that might arise from non-compliance or misconduct. Moreover, investors need to conduct a thorough and comprehensive legal regulatory risk management and due diligence process before and after making their investments, to ensure that they are not exposed to unforeseen or unacceptable risks.
The legal regulatory risks when investing in AI companies can vary depending on the type, scope and location of the AI activities, as well as the industry and sector involved. However, some of the common and significant risks include:
To mitigate the legal regulatory risks when investing in AI companies, investors need to adopt a proactive and holistic approach to legal regulatory risk management and due diligence, both before and after making their investments. Some of the steps and strategies that investors can take include:
Investing in AI companies can offer significant opportunities and benefits for investors. However, investing in AI companies also entails significant challenges and risks, especially from a legal regulatory perspective. Therefore, investors need to be diligent in managing the legal regulatory risks by conducting a comprehensive legal regulatory risk management and due diligence process, both before and after making their investments. By doing so, investors can reduce the potential or existing legal regulatory liabilities and penalties. Our experts are happy to support you in your investment due diligence process.
Partner Legal, PwC Switzerland
Tel: +41 58 792 18 56
Partner, Leader Digital Assurance and Cybersecurity & Privacy, PwC Switzerland
Tel: +41 58 792 84 59
Director, AI & Data Leader Tax & Legal Services, PwC Switzerland
Tel: +41 58 792 48 28