As artificial intelligence (AI) spreads rapidly across industries, boards of directors play a crucial role in overseeing how this new technology is deployed within organizations. Directors are a critical voice for ensuring that AI is being used responsibly and does not expose companies to undue risks.
AI offers well-documented benefits capable of improving efficiency, and providing large-scale data analysis and automation, but it also brings potential risks, many of which remain unknown at this point given the rapid evolution of the technology. While board members are not expected to understand every technical detail of AI models and tools, they must grasp the company’s overall AI strategy, its use cases and the governance framework put in place. Boards of Directors are navigating unfamiliar territory, trying to comprehend how AI may expose the organizations to unforeseen risks or unintended consequences.
How Boards Are Engaging with AI
To address the challenges AI presents, there are actions boards must take to keep up with the evolving technological landscape.
Management engagement. Many boards allocate time on their agendas to hear directly from senior executives about the organization’s AI strategy. These sessions may cover new applications being piloted, challenges in implementation, risk assessments and the integration of AI into the organization’s overall business strategy.
Education. Directors must recognize that they need a working understanding of AI at a strategic — not technical — level. Some boards request internal education sessions led by management, while others seek input from outside experts or attend industry conferences. AI publications and thought leadership reports are also increasingly on directors’ reading lists.
Committee structures. Larger boards with access to more resources are forming committees dedicated to emerging technologies. A technology or innovation committee can take a deeper dive into the company’s AI initiatives, evaluate the risks and opportunities and report back to the full board and leadership team.
Governance clarity. Beyond ad hoc updates, boards are setting expectations for how frequently they will receive reports on AI initiatives, who will deliver the updates and how frequently, and whether independent advisors should be engaged to provide additional expertise.
Key Questions Boards Should Ask
To provide meaningful oversight, directors need to go beyond surface-level updates and ask management probing questions that reveal the status of the organization’s AI initiatives. Among the most important:
- What is the governance structure for AI?
- Who is responsible for selecting, integrating and overseeing AI systems, and do they have the necessary expertise?
- Which departments are using or planning to use AI?
- Is there a central inventory of all use cases to avoid duplication or unmanaged risk?
- What policies and procedures guide AI adoption, testing and integration?
- How are AI platforms evaluated before onboarding?
- What testing is performed, and what does it reveal about issues like accuracy, reliability and hallucinations?
- How are risks identified and mitigated?
- What processes ensure that new or emerging risks are escalated to the Board?
- What systems are in place for ongoing monitoring to ensure AI tools continue to function as intended over time?
- What legal or compliance obligations apply, especially in global organizations where regulations vary significantly by jurisdiction?
These questions help ensure directors are not just hearing about AI successes but are also probing for vulnerabilities that could put the organization at risk.
Third-Party Risks: Beyond the Company Walls
AI risk does not stop at the boundaries of the organization. Many companies rely heavily on third-party service providers, and their use of AI can directly impact the business.
For example, a vendor that integrates AI into its processes could deliver outputs that are more thorough and data-rich, creating value for the client company. However, if that vendor’s AI generates biased or fabricated results, the consequences may ultimately fall on the client as well. Boards need to confirm that management is assessing not only the company’s own AI practices but also the AI usage of its most critical partners and suppliers.
This level of oversight requires boards to think more broadly about risk ecosystems and interdependencies. It also pushes boards to consider how external adoption of AI could ripple into an organization’s operations and its reputation.
Balancing Opportunity and Risk
For boards, AI oversight is ultimately about balance. Directors must ensure the company is positioned to take advantage of AI’s competitive opportunities while putting guardrails in place to manage the risks. That means encouraging innovation while demanding transparency. It means supporting management in experimentation and still asking tough questions about governance.
AI is not a passing trend. It is becoming an embedded feature of modern business that will only expand in scope and sophistication in the coming years. Boards that take a proactive approach to AI oversight today will be better equipped to navigate its complexities tomorrow.
The Bottom Line
AI oversight is fast becoming a core responsibility for boards. While directors are not expected to be experts in the growing technology, they must develop a strategic understanding of how AI is used within organizations, how it needs to be governed and how risks need to be managed. By engaging with management, pursuing education, asking probing questions and monitoring third-party exposure, boards can fulfill their fiduciary duty while guiding organizations responsibly into the AI era.
At its best, AI can be a powerful tool for growth and efficiency. At its worst, it can create new forms of risk that undermine trust and performance. Boards are uniquely positioned to help ensure that organizations capture the benefits while guarding against the dangers. The decisions directors make today will set the tone for how responsibly their companies harness AI in the years to come.
