Singapore companies risk exposure amidst poor AI readiness

Many firms also lack internal expertise and have yet to integrate AI risk into their core control frameworks, the firm said.

Only 13% of Singaporean organisations are fully prepared for AI adoption, according to the Cisco AI Readiness Index.

At the same time, 91% have reported identity-related breaches, many of them linked to multi-cloud environments and emerging generative AI (GenAI) tools.

A new white paper released by the Financial Services Information Sharing and Analysis Center (FS-ISAC), titled “Charting the Course of AI: Practical Considerations for Financial Services Leaders,” urges firms to adopt an “all-hazards” approach to GenAI—prioritising risk governance as they integrate AI into core operations.

It highlights the urgent need for financial institutions to manage operational, legal, and strategic challenges even as they explore AI’s potential to transform productivity.

The report identifies key near-term risks such as over-reliance on AI systems, a lack of mistake tolerance frameworks, hallucinated or misleading AI outputs, and the spread of “shadow AI”—unauthorised use of generative tools by employees.

Many firms also lack internal expertise and have yet to integrate AI risk into their core control frameworks.

On the legal front, the report warns of growing exposure to intellectual property issues, including the risk of “IP laundering” where AI-generated content unknowingly includes copyrighted material. Global regulatory efforts such as the EU AI Act, OECD guidelines, and Singapore’s own MAS FEAT principles are expected to increase compliance burdens, particularly for cross-border financial firms.

FS-ISAC lays out risk scenarios across short-, medium-, and long-term timeframes. In the short term, AI is likely to augment rather than replace roles. In the medium term, regulatory complexity and labour shifts—particularly in cybersecurity—will increase.

Long-term risks include model collapse, market consolidation, and declining returns on AI investment as tools saturate and productivity gains level off.

The report also provides eight critical questions to help financial institutions assess their AI readiness. These include whether firms have clear governance in place, how they are handling training data, what safeguards are in place for employee AI use, and how they plan to manage the long-term workforce impact.

Whilst the speed of GenAI development is outpacing most organisations’ ability to adapt, FS-ISAC cautions that the costs of underestimating the risks could be far higher than the benefits of rapid adoption.

For Singapore’s financial sector in particular, where the threat environment is intensifying, AI implementation must be paired with strong oversight to protect both resilience and trust.