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Isaca AAIA Exam - Topic 3 Question 13 Discussion
Topic #: 3
When converting data categories before training an AI model, which of the following scenarios represents the GREATEST risk?
The AAIA Study Guide emphasizes that encoding categorical variables must preserve the semantic meaning and order of categories when relevant. The greatest risk occurs when ordinal data---such as customer rewards tiers---is treated as nominal through one-hot encoding, which removes the inherent order and may impair model learning.
''Improper encoding of ordinal variables as nominal can distort the model's understanding of relationships, leading to inaccurate predictions or biased outcomes.''
Customer reward categories (economy < business < first class) have a natural order. One-hot encoding ignores this order, potentially degrading model accuracy. Other options represent nominal data and are appropriately encoded.
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