Summary
- AI governance ensures that artificial intelligence is used in a way that’s fair, responsible, secure, ethical and in compliance with any applicable laws and industry-specific regulations.
- Business leaders must establish and maintain AI governance policies to ensure transparency, privacy, security, fairness and accountability.
- Without AI governance, businesses risk data breaches, reputation damage, loss of trust, and legal and regulatory consequences, among other issues.
- Sixty-three percent of the breached organizations included in IBM’s 2025 Cost of a Data Breach Report had no AI governance policy or were still developing one.
- Our technology advisors can help you explore AI solutions with built-in governance, risk and compliance (GRC), including a secure gateway to 14+ leading large language models (LLMs).
Artificial intelligence is everywhere these days. A July 2024 survey by McKinsey found that 78 percent of the professionals polled said their companies were using AI for a minimum of one business function.
However, when adopting AI, it’s crucial to balance speed with security and risk management. IBM’s 2025 Cost of a Data Breach Report found that among the organizations included in the annual study, 13 percent reported breaches related to their AI models or applications, and 63 percent of breached organizations either had no AI governance policy or were still in the process of developing one.
Additionally, 20 percent of the companies included in IBM’s study experienced breaches involving shadow AI (i.e., unmonitored AI usage), and those with high shadow AI levels saw average data breach costs $670,000 higher than those with low or no shadow AI usage.
Those statistics illustrate the risks associated with using AI without proper governance. If you’re an IT or business leader overseeing the implementation of artificial intelligence at your organization, here’s what you need to know about AI governance and why it’s non-negotiable if you want to safeguard your company’s data integrity, reputation and finances.
What is AI governance?
AI governance refers to policies, frameworks and best practices that ensure artificial intelligence is used fairly, ethically, responsibly, transparently and in line with applicable laws and industry-specific regulations, according to Quest.
Why is AI governance important?
Using AI models for business processes carries risks related to bias, compliance, data leaks, and the improper and unethical use of these models, according to TechTarget. While generative AI (genAI) and agentic AI tools have become increasingly popular for their ability to boost productivity and support better business decisions, misuse of the technology and a lack of awareness about AI model biases can negatively impact your business and clients. For example, an AI tool trained using flawed data might inappropriately deny loan applications for a financial institution.
Failing to establish AI governance policies can have serious consequences for your organization. Here are some of the most concerning risks associated with ungoverned artificial intelligence, according to Quest.
- Reputation damage
- Loss of trust among customers, who might choose to take their business elsewhere
- Legal and regulatory penalties
- Data breaches and exposure of private and proprietary information
- Missed business opportunities due to AI model mistakes based on flawed data
What are some best practices in AI governance for companies?
To mitigate the risks associated with AI, it is essential to establish and maintain effective governance practices. Here are some steps you can take to ensure proper AI usage within your business, according to TechTarget and Splunk.
- Assemble an AI governance and oversight committee.
- Create and continually update AI governance policies to ensure privacy, security, safety, accountability and transparency.
- Consider pre-existing AI usage frameworks (e.g., the NIST AI Risk Management Framework)
- Inform your employees about the risks of improper and unauthorized AI usage.
- Partner with a third-party provider to conduct an AI risk assessment and address any issues found within your organization.
- Define clear metrics and key performance indicators for AI model performance and data quality.
- Ask your employees and clients for feedback on AI models and applications.
- Monitor your team’s AI usage and quickly correct any misuse or inappropriate actions.
We can help you streamline AI adoption and governance by deploying a secure AI gateway to 14+ leading LLMs with built-in governance, risk and compliance (GRC) and full audit trails. Call 877-599-3999 or email sales@stratospherenetworks.com to connect with our trusted technology advisors and accelerate your AI journey.
