AI Vendor Due Diligence: The New Regulatory Standard for Healthcare and Financial Services in Canada and the UK
In regulated industries such as healthcare, insurance, and financial services, AI vendor claims can be misleading and dangerous. In Canada and the UK, regulators are increasingly demanding that organisations verify the capabilities of AI vendors before deploying their technology. The defensible position described by these regulators is a validation file.
Vendors often make confident claims about their AI solutions’ ability to solve complex problems in regulated sectors. However, independent verification is necessary to ensure that these claims align with real-world operations and governance requirements. Failure to do so can result in costly reputational damage or even legal liability when boards, regulators, or courts ask questions.
Organisations buying AI solutions face three key risks: capability risk (does the technology do what was claimed), governance risk (can the decision be defended when boards or regulators ask), and liability risk (what the organisation is accountable for when the AI errs). The development of validation files sharpens capability risk, making it essential for organisations to verify vendor claims before committing resources.
To mitigate these risks, prudent organisations take strategic and compliance steps. This includes developing a clear understanding of their governance requirements, reviewing vendor documentation, conducting technical verification, and engaging independent experts for due diligence. Struggling with this process is not uncommon; internal teams may be too close to the decision, and there is no straightforward way to test vendor claims.
Straven & Co helps organisations address these risks by providing AI validation services. Our experts examine the proposed solution against the client’s real operations, people, governance obligations, and legal exposure, delivering a plain verdict: proceed, proceed with conditions, or do not. Unlike vendors, we have no product to sell and earn nothing by recommending more, ensuring our judgment can be trusted.
Straven & Co examines AI decisions before they are acted on: stravenandco.com