KUALA LUMPUR (June 22): Talent is a structural issue in Malaysia, as only 13% of Malaysian financial institutions (FIs) are confident in their ability to attract the right talent, while 70% of FIs struggle to hire and retain talent for artificial intelligence (AI).

Addressing the challenge, 78% of FI are already investing in upskilling existing talent, the “From Oversight to Advantage: How Boards Can Accelerate AI Adoption in Malaysia’s Financial Institutions” report found.

Commissioned by the Financial Institutions Directors’ Education (FIDE) Forum and developed in collaboration with Accenture Malaysia, the report’s findings showed that several institutions have even successfully translated early adoption into enterprise-wide transformation.

The report also revealed that while 71% of Malaysian banks have implemented at least one AI application, only 17% of FIs surveyed have successfully scaled strategic AI initiatives.

Similarly, 77% of insurers and takaful operators have implemented AI in their organisations, but unlike FIs, no Malaysian insurers have scaled AI strategies.

Additionally, only 15% of global companies, such as the likes of JPMorgan and DBS Bank are ready for an AI transformation. In Malaysia, that number is halved to 8%. This is because the majority of companies are focused on experimenting and progressing with their experimentation.

“There is clear intent from an experimentation pilot proof-of-concept perspective, but if we are not going to take it into production, the divergence between the competitive firms and the other firms in the economy is going to get bigger and bigger. So it's a race against time,” said Lokesh Sharma, Malaysia data and AI lead at Accenture Malaysia during a presentation of the report at the Asia School of Business on Monday.

Board literacy on AI must also be improved for FIs to scale AI initiatives. Strikingly, none of the board members surveyed considered themselves an expert in the field of AI. A majority of board members, or 78%, expressed understanding of the concept of AI but are unaware of the risks, and only 9% claimed to be fluent in the subject matter to engage substantively in AI conversations.

From these findings, the report shared four board-led imperatives that Malaysian FIs can learn and implement. The first is to focus on strategic bets in value pools that are linked with profit and loss (P&L) impacts, such as lead origination and customer servicing, which have value pools of US$327 million (RM1.4 billion) and US$241 million respectively.

Malaysian banks are heavily focused on IT engineering and software development lifecycles, as well as Know Your Customer (KYC) systems; however, these two strategic bets rank fifth and seventh in P&L impact, according to respondents in the survey.

The second is on reinventing talent and ways of working, and how board members utilise their networks to build partnerships with local universities and funding ecosystems that strengthen a sustainable talent pipeline.

Developing an agentic and secure digital core is another imperative that Lokesh highlighted. “The platform modernisation has to be attended to, because without that, you would not be able to deliver the value that would be promised to the board and the shareholders,” says Lokesh.

He added that only 9% of FIs have a data platform that can handle the demands of Al at scale, while the rest remain at the exploratory stage for Al platforms, or are still working through data cleansing and governance policies.

Finally, FIs must be proactive in closing the gap of responsible Al. According to the report, board members are engaging with AI governance, but it remains on an ad hoc basis. 95% of FIs are still in the planning or early stages of responsible AI, and 43% of the companies are managing AI risks with frameworks that were built for other risk types. 74% of boards have yet to make responsible AI a standing agenda item.

“You have to think about responsible AI [from] the start, it has to be embedded. It is not just a compliance initiative that needs to be done to meet the obligations that Bank Negara Malaysia (BNM) is outlining through its policies. I think they are leading the way and setting the guardrails which can help organisations in Malaysia be competitive,” said Lokesh.

Moreover, Lokesh shared six call-to-actions from the report that board members can enact for the next 90 days to see changes in the business.

The first few steps are to make responsible AI decisions a recurring part of the board agenda, request a briefing of the top three to five AI initiatives, and appoint a board level Al champion to lead Al literacy development whilst keeping governance aligned with the pace of deployment.

The next steps involve creating a credible talent gap plan, calling for a digital core readiness assessment and finally, creating an Al risk framework gap analysis.