When AI Optimizes the Wrong Goal
Published on Friday, January 30, 2026
The company deployed artificial intelligence to optimize financial and operational decisions. Initial results were promising: reduced losses, improved margins, and more accurate forecasts.
Then a rare, extreme scenario occurred — one the AI had never seen in historical data. The algorithm, designed to maximize average performance, did not account for extreme events affecting business continuity. The optimized strategy inadvertently created systemic risk, endangering organizational resilience.
The executive committee realized that a high-performing model is not inherently safe. Automated systems, no matter how sophisticated, do not naturally anticipate rare events. Exclusive reliance on AI without human oversight generates a blind performance risk, where short-term optimization can compromise long-term survival.
To address this vulnerability, a new role was created: Head of Improbable Scenarios. Their mission is to identify, model, and test the impact of extreme events that AI may overlook, ensuring performance does not undermine resilience.
For the board, the strategic lesson is clear: AI is a powerful tool, but it does not replace governance or human analysis. Critical decisions must integrate human supervision and consideration of improbable scenarios to prevent optimization from becoming a risk in itself.
Depending on its business sector and the nature of its activities, your organization may be impacted, directly or indirectly, by this global risk over the coming years.
Whether you are a director, an executive or a manager, you may be wondering if your company is exposed to this global risk or other potential events. And if so, are you and your organization ready to face these challenges?
Should you need advice on the appropriate risk governance and enterprise risk management approach for your organization, please contact us.
Baldwin Global is an independent advisory group offering professional services, education and training in risk governance and enterprise risk management. We help our clients’ boards of directors and management teams attain their objectives by embedding sound risk oversight and management practices into their decision-making process to have a significant positive impact on their business.
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