From AI Policy To AI Governance

In response to the growing use of Artificial Intelligence ("AI") across critical business processes and decision-making, organisations are increasingly adopting AI policies to promote responsible use and demonstrate their commitment to ethical AI. While AI policies play an important role in promoting responsible use, they are unlikely to be sufficient on their own. Organisations should also establish the governance structures needed to oversee AI throughout its lifecycle and manage the risks and opportunities arising from its use.

Although the terms are often used interchangeably, they serve different purposes. An AI policy establishes expectations for how AI should be used. AI governance ensures that those expectations are implemented, monitored and continuously improved. Understanding this distinction is becoming increasingly important as organisations face growing regulatory scrutiny and seek to integrate AI into core business functions.

AI Policy: Setting the rules

An AI policy is a governance instrument that establishes an organisation’s expectations regarding the development, procurement and use of AI systems. Depending on the organisation, an AI policy may address:

• acceptable and prohibited uses of AI;
• employee responsibilities;
• data handling;
• confidentiality obligations; and
• human oversight.

In short, an AI policy tells people what they should and should not do and every organisation deploying AI should have one. However, a policy is ultimately a document. On its own, it cannot ensure that AI risks are identified, monitored or managed, nor can it allocate accountability for AI-related decisions.

AI Governance: Embedding accountability

AI governance is the broader organisational framework through which AI is deployed, monitored and controlled. Rather than focusing solely on rules, AI governance establishes decision-making structures, accountability mechanisms and oversight processes that ensure AI is used responsibly throughout its lifecycle. It answers questions such as:

• Who approves the deployment of high-risk AI systems?
• Who assesses legal, ethical and regulatory risks?
• Who monitors AI performance after deployment?
• Who is responsible when an AI system produces inaccurate outputs or causes harm?
• What are the escalation paths?

These are governance questions rather than policy questions. An organisation may have an excellent AI policy but still have weak governance if no one is accountable for ensuring that the policy is implemented in practice.

A practical example

Consider two organisations that introduce generative AI into their operations. Both implement AI policies governing acceptable use, human review and the protection of confidential information. However, only one establishes an AI governance framework, including cross-functional oversight, approval processes for high-risk use cases, periodic reviews and reporting to management and the board. If an AI system produces inaccurate outputs, exposes confidential information or creates regulatory risks, the organisation with both an AI policy and AI governance in place will be far better positioned to respond effectively and demonstrate accountability. The difference is not the policy itself, but the governance framework supporting it.

Why boards should care

AI governance is no longer solely an IT or innovation concern. As organisations increasingly integrate AI into operational and strategic decision-making, boards are expected to exercise oversight over AI-related risks in much the same way they oversee cybersecurity, data privacy and enterprise risk management.

This aligns with the principles of the King V Report on Corporate Governance (2025), which emphasise the importance for governing bodies to oversee technology and information governance. See our previous article for more information about this - ENS - News - King V: Data, information and technology – what you need to know. Boards need not approve every AI deployment, but they should satisfy themselves that appropriate governance structures, reporting mechanisms and accountability frameworks are in place, and that management effectively identifies, manages and monitors AI-related risks over time.

This reflects a broader shift in corporate governance. Increasingly, regulators, customers and shareholders are unlikely to ask whether an organisation has an AI policy. Instead, they are more likely to ask how AI risks are governed, who is accountable for AI-related decisions and whether effective oversight mechanisms exist. Legal and technology teams should also be more involved throughout the AI lifecycle to help manage procurement, contractual, privacy, intellectual property, cybersecurity and regulatory risks, and to ensure appropriate oversight and accountability for AI systems.

Questions organisations should consider

As organisations mature their AI capabilities, they should regularly assess whether their governance frameworks remain effective. Amongst others, organisations should consider who is accountable for AI within the organisation, whether they have visibility into where AI is being used (including shadow AI), oversight over high-risk AI systems, and whether the organisation can demonstrate its governance, accountability and decision-making if challenged by a regulator, customer or court.

Looking ahead

As AI regulation continues to mature, organisations are likely to face increasing scrutiny over how AI decisions are governed, not simply whether an AI policy exists. The organisations best positioned for this future will not necessarily have the longest policies or the most sophisticated AI tools. They will be those that establish clear accountability, embed governance into business processes and treat AI as an enterprise-wide governance issue rather than a technology initiative. Our TMT team is able to advise clients on, amongst others, AI governance frameworks, AI policies, governance structures and regulatory compliance. If you require assistance in developing or strengthening your organisation's approach to AI governance, please feel free to contact one of our specialists below.