AI Governance: What It Is and Why It Matters

What Are the Objectives of AI Governance?

AI governance provides essential guidance to organizations to help ensure their AI initiatives align with both regulatory standards and ethical considerations. Implementing AI governance as an oversight framework helps organizations continually monitor AI operations against policy boundaries for regulation, privacy, safety and risk. Incorporating AI governance practices ensures effective organizational frameworks that assess existing AI systems and establish monitoring mechanisms. It navigates challenges such as balancing innovation with AI regulation and managing data privacy concerns. 

Establishing alignment between business objectives and AI strategy, determining responsibilities, streamlining processes with automation and providing data stakeholders with governed ways of working helps companies achieve objectives that can help unlock faster time to business value.

Some of the critical objectives of AI governance include: 

• Promoting Trustworthiness: Deploying AI governance practices helps ensure that AI models and the underlying data is managed and processed according to established practices. This builds confidence and trust in AI systems.

• Ensuring Fairness: With AI governance, companies can monitor data quality for drifts and biases and take corrective action. Maintaining the accuracy, reliability and fairness of data for training and operating AI-driven systems by applying rigorous standards and metrics helps prevent biased outcomes and hallucinations where incorrect information is presented as facts.

• Enhancing Transparency: A key objective of AI governance is providing visibility into AI models and explainability for AI-driven decisions. Lack of transparency results in AI appearing as a black box to users. Making AI processes and underlying data understandable, clear and traceable helps stakeholders comprehend how AI models make decisions, which aids in identifying potential biases or errors.

• Protecting Data Privacy: AI models consume large volumes of diverse data, which could include personally identifiable information (PII) and other sensitive data. Governing this data in AI systems according to data privacy policies and security protocols is crucial to the responsible use of AI. 

• Facilitating Compliance: AI regulations are fast emerging worldwide to promote responsible and ethical use of AI. The exponential increase in data sources, both internal and external, accelerated by the use of AI adds to the complexity of managing in a modern enterprise. AI governance ensures that AI initiatives comply with legal and regulatory standards throughout their lifecycle.

• Encouraging Innovation: AI governance helps establish a balance between regulation and innovation to drive technological advancement responsibly by enabling governed data access and sharing for various use cases across the organization without compromising data integrity.

Why Is AI Governance Important?

Generative AI is still developing, and many companies face challenges when AI yields unreliable outcomes. This can harm their reputation, lead to financial losses and attract regulatory scrutiny. Ultimately, without proper oversight of AI and its data, businesses risk falling behind competitors and could find themselves in negative headlines due to inadequate AI regulation. This is why establishing foundational principles for AI ethics is crucial to prevent issues such as bias, unfair decision-making and violations of human rights in AI systems.

For example, remote tutoring company iTutor Group had to pay $365,000¹ to settle a suit² for unlawful age discrimination. It used an AI-powered recruiting software that automatically rejected female applicants ages 55 and older and male applicants ages 60 and older. Similarly, Air Canada was ordered to pay damages to a passenger after its virtual assistant gave him incorrect information related to availing of a bereavement discount.³

Below are some ways that highlight the importance of AI governance for modern enterprises:

• Loss of Trust – AI governance helps maintain standards for the responsible and ethical use of AI. AI systems can behave unpredictably without proper oversight, leading to outcomes that users cannot understand or trust. 

• Increased Risk – Ungoverned AI applications can lead to operational inefficiencies and failures that disrupt business. The lack of guardrails on the responsible use of data and AI increases exposure to security vulnerabilities and cyber threats.

• Resistance to AI Adoption – Lack of AI governance causes resistance to AI adoption owing to uncertainties and fears. Without clear guidelines, employees and stakeholders may lack confidence in AI's reliability and effectiveness, ultimately slowing AI adoption.

• Poor Decision Making – AI systems that lack transparency, accountability and reliability can lead to inconsistent outcomes. Incomplete, biased and inaccurate data quality can cause AI models to hallucinate and generate incorrect insights. This can result in strategic missteps, operational inefficiencies and even damage to reputation.

• Non-Compliance with Regulations – Adherence to AI legislation and regulatory standards is crucial. Without established guidelines, AI systems may inadvertently violate data privacy laws, discrimination policies or safety regulations.

• Damage to Brand Reputation – Unchecked AI systems can be prone to misinformation, erroneous business decisions and security breaches. These can damage customers’ confidence and result in negative publicity affecting the brand's image and credibility.

What Are the Business Benefits of AI Governance?

AI offers great potential, but without robust and ethical governance, it can lead to issues like ethical dilemmas and misuse. AI governance helps companies harness AI's benefits while managing risks in several ways:​

• Improve the reliability of AI outcomes: AI governance enhances reliability by establishing frameworks that ensure transparency, accountability, and quality controls. These frameworks guide the development and deployment of AI models, promoting the use of robust, unbiased and high-quality data to derive outcomes.

• Reduce compliance risks: By establishing clear guidelines and standards that align AI systems with legal and regulatory requirements, organizations can demonstrate adherence to regulations and address violations promptly. Organizations can proactively reduce legal liabilities and safeguard against costly fines and penalties.

• Ensure explainability: Transparent AI systems enable organizations to understand and communicate how AI-driven decisions are made. Clear insights into AI processes help organizations make more informed decisions, improve operational efficiency and drive strategic outcomes with confidence.

• Promote secure collaboration: AI governance outlines clear protocols for using data and AI across the organization. Implementing guidelines for protecting sensitive data and access management controls to govern how data and AI are shared fosters innovation and accelerates trusted data access. This leads to faster market entry and competitive advantage while safeguarding against potential risks of AI.

• Build trust among stakeholders: AI governance creates a predictable and trustworthy environment, alleviating fears and uncertainties related to AI deployment. It enables visibility into AI models and the underlying processes that ensure data is reliable, trustworthy and accurate, helping to address the trust deficit in the use of AI. AI governance also addresses concerns related to accuracy, fairness, regulatory compliance and responsible use, which builds confidence. This helps scale AI programs efficiently and accelerate adoption.

• Boost AI fluency: AI governance enables clear documentation and application of processes and standards for using AI. This makes AI concepts more accessible, transparent and understandable for both technical and non-technical users. AI governance also advocates structured training programs that educate employees on AI technologies, ethical considerations and compliance requirements, promoting responsible and informed use.

Addressing the Critical Components of Responsible AI Governance

Core Values and Principles

Central to the establishment of AI governance is identifying and implementing core ethical principles and values for using AI. These principles guide the organization in the ethical development and responsible application of AI technologies across the enterprise. These principles should also align the company’s mission and vision with the expectations of AI.  

Some of the key principles to consider for responsible AI governance include:

• Fairness and Bias Mitigation: Creating AI systems that operate impartially and equitably, ensuring they do not propagate biases.

• Transparency and Explainability: Making AI systems understandable, accessible and open to scrutiny to demystify AI technologies.

• Privacy and Data Protection: Safeguarding individuals' personal information and ensuring that AI systems operate within legal and ethical boundaries.

• Accountability and Governance: Ensuring that AI systems and their outcomes are the responsibility of identifiable individuals or organizations through clear roles, documentation and oversight mechanisms.

• Safety and Security: Operating AI reliably and preventing unauthorized access, breaches or misuse, maintaining confidentiality and integrity.

• Societal Impact: Assessing and managing the broader effects of AI systems on society, ensuring that these technologies lead to positive social, economic, and cultural implications.

It’s critical for organizations to find the right balance of scaling digital businesses with AI-powered innovation to help ensure that results are predictable, reliable and aligned with the organization's values. Establishing these principles as guidance for developing and deploying AI drives reliable, value-aligned outcomes.

Policies and Procedures

Organizations need to establish data and AI governance policies and procedures to operationalize their vision for using AI. These policies and procedures outline how the AI principles will be integrated into day-to-day business operations. Setting consistent rules helps maintain uniformity in managing and utilizing AI. Companies must define and document clear and comprehensive AI governance processes for critical areas such as data quality management to train AI models, data protection and privacy, model development, deployment and monitoring, transparency and explainability.

By establishing clear policies and procedures, organizations can ensure consistent and compliant AI data practices across the enterprise and minimize the risk of unintended consequences.

Organizational Governance Structures

Establishing a governance structure is crucial to regulating AI effectively. It involves creating dedicated governance bodies and assigning clear roles and responsibilities to implement and oversee AI governance effectively. This helps establish accountability and empowers teams to manage specific aspects of AI. 

AI governance is a collective responsibility. While executive leadership is ultimately responsible, AI governance programs need support from cross-functional teams, including the CDO office, legal counsels, audit teams, IT experts, data stewards, data scientists and business leaders to implement, monitor and improve it.

AI Fluency and Culture  

It is essential to empower teams involved in AI development and deployment with an intricate understanding of data quality, completeness, governance and privacy — key aspects of AI readiness.

A recent survey conducted by CDO Magazine found that around 60% of participants cited limited skills and resources as a barrier to AI success.⁴ 

AI governance requires comprehensive training and awareness programs for all stakeholders involved in AI development and deployment. A nuanced understanding of AI throughout the organization promotes a culture of transparency and knowledge-sharing. Ongoing training and awareness initiatives help build a nuanced understanding of the potential risks of AI and promote a shared sense of responsibility for the ethical use of AI.

Monitoring and Risk Management

AI governance is a journey. It is expected to evolve as AI scales and operations grow. Establishing an AI governance program is just the first step. Companies need to monitor and measure the effectiveness of these programs. By defining and tracking the right AI governance metrics, companies can ensure they are using AI responsibly. With comprehensive monitoring and auditing processes, enterprises can proactively identify and address AI risks and take action to remediate them. 

Some key areas to measure include compliance, system performance and outcomes, risk management, ethical implications, social impact and organizational readiness and adoption.

Data Management Platforms

Integrating, managing, governing, securing and sharing data at the speed and scale that AI models need, with multiple, fragmented and disconnected AI tools, is challenging. According to CDO Insights 2024: Charting a Course to AI Readiness, organizations need at least five or more tools to get the job done, which creates a new problem of how to integrate and manage the complexity of five or more software stacks.⁵

Companies need modern, integrated, AI-powered data management platforms to implement effective AI governance. These platforms provide the foundation of trusted data on which AI models operate and allow organizations to maintain data quality, support compliance, enhance security and enable the scalability requirements of AI-driven digital businesses.

Best Practices in Implementing an AI Governance Framework

To help your AI systems not only follow the rules but also boost business innovation, put the following AI governance best practices into action.

Data Quality Management

Data integrity directly impacts the reliability of AI outcomes. Focus on the availability of high-quality data to support the likelihood that AI models produce accurate outcomes. Data quality and observability contribute to optimizing data pipelines. This helps to deliver accurate input data and provide transparency into the data lifecycle, improving the reliability and performance of AI.

Find out how Dr. Reddy’s Laboratory accelerated AI initiatives with data quality. 

Privacy and Security  

Implement robust data security and privacy standards to mitigate risks, including those from data breaches, unauthorized access, non-compliance and cyberattacks. Sensitive consumer data, ranging from demographics and social media activity to geographical information and online shopping patterns, needs to be managed according to data protection protocols and processes that safeguard individuals' personal information and ensure that AI systems are not used to infringe upon privacy rights or left exposed to security vulnerabilities.

Learn how Helia built a data foundation that home buyers could trust. 

Stakeholder Engagement and Human-Centered AI 

Promote transparency, accountability and a shared understanding of the ethical and practical considerations surrounding AI systems by engaging diverse stakeholders throughout the design and implementation process. This also helps build AI systems that enhance human capabilities and align with human values, respecting rights and privacy.

Read how Genesis Energy is empowering business teams to benefit from modern data and AI governance.

Regulatory Compliance  

Organizations must stay updated on relevant regional AI regulations and standards such as the EU AI Act. This includes understanding data protection laws, privacy regulations and industry-specific guidelines. Regularly updating policies and practices to align with evolving regulations ensures ongoing compliance and ethical use of AI technologies, enhancing trust and efficiency.

Explore how organizations can advance ESG data management and reporting. 

AI for Data Management  

Data-driven organizations are expected to experience a significant spike in their volume of data – structured and unstructured – and the number of sources. According to research, 41% of data leaders reported they already struggle with 1,000+ sources.⁶ Handling large volumes of data across an increasingly complex data landscape and providing continuous oversight on data quality and compliance with manual processes is not feasible. Companies need AI-powered data governance tools that can automate governance processes for greater reliability. These tools can learn from data patterns and user interactions and seamlessly adapt to evolving business needs and regulatory requirements.

Read how Paycor uses AI to accelerate workforce insights.

Role of Stakeholders in AI Governance

AI governance is a collaborative effort that involves multiple stakeholders, each playing a vital role. By considering various perspectives, organizations can create a comprehensive and inclusive AI governance framework that incorporates the needs and concerns of all stakeholders.

Different data and AI stakeholder personas play crucial roles in AI governance by contributing diverse expertise:

• Chief Data Officers (CDOs): CDOs play a pivotal role in policy development and strategic planning to maximize AI value. They are responsible for laying the overall vision for using AI across the organization and securing executive sponsorship from the C-suite. They oversee data and AI governance strategies, aligning them with organizational goals and regulatory requirements and often sponsor AI governance programs.

• Legal and Compliance Officers: AI governance programs need support from legal and compliance teams to stay updated with the latest regulations and their implications. They ensure that AI systems comply with legal standards, reducing the risk of violations and enhancing trust.

• Line of Business Leaders: They define strategic objectives and ensure AI initiatives align with business goals. Their involvement is pivotal in determining that AI governance processes deliver tangible business value. 

• Data Scientists: Data scientists play a key role in determining the efficacy of AI governance. Their involvement in developing, validating and leveraging AI models to deliver insights helps assess models' performance and mitigate biases and errors.

• Data Engineers: Primarily responsible for building and maintaining data pipelines, data engineers ensure data quality and availability to support the development and deployment of robust AI systems.

• Data Stewards: The availability of accurate, consistent and reliable data for AI models is crucial for effective governance. Data stewards facilitate access to trusted data for relevant stakeholders without compromising privacy, compliance and security standards. They also work closely with stakeholders to align data management practices with AI governance goals.

• IT Teams: AI needs scalable infrastructure. IT teams manage the technical infrastructure and ensure that AI systems are integrated seamlessly and operate efficiently within existing frameworks.

• End Users: AI governance is meant to evolve. Therefore, data users play a pivotal role in designing governance models to meet business requirements and improving usability by providing feedback on the value delivered.

The Future of AI Governance and Potential Regulatory Changes

AI governance is rapidly evolving. With AI becoming integral to businesses' operations and growth, the momentum towards ensuring AI is used ethically and responsibly is only expected to accelerate. 

Governments worldwide are working towards implementing comprehensive regulatory frameworks emphasizing transparency, fairness and accountability in using AI.

Governance frameworks must be more adaptive and responsive to evolving regulations, reducing organizations' burdens and enhancing compliance efficiency.

Technology advancements and enhancements are expected to simplify and streamline data management processes. AI-powered automation and enhanced user experience that enables self-service capabilities will allow for more proactive remediation of AI-related ethical, privacy and security concerns.

Investments in AI literacy and the availability of user-friendly tools that improve the transparency and explainability of AI systems will help build trust for users and enable organizations to balance innovation while promoting safe, equitable and beneficial AI for all.

How Can Informatica Help with AI Governance? 

Getting data ready for AI with legacy, fragmented and manual tools and processes is unviable. However, only 2% of companies have fully embraced responsible AI practices.⁷ Companies need comprehensive, scalable, AI-powered data management platforms to address this gap. 

Informatica Intelligent Data Management Cloud (IDMC) is a unique, cloud-native, AI-driven platform that enables organizations to manage data throughout the entire data and AI lifecycle from a single interface. It helps identify, classify and integrate data from various sources, monitor data health, enforce privacy and security and democratize data safely, ensuring transparency and trust in AI models. 

With IDMC, companies can unleash the scalability and flexibility needed to adapt to AI requirements without compromising performance. It provides comprehensive services to operationalize AI governance initiatives with trusted data. Integrated capabilities across data catalog, data integration, data quality, data observability, master data management, data governance, data sharing, data access management and data privacy help ensure that data in AI models is used responsibly and in alignment with organizational values.

A Holistic Approach to AI Governance

As enterprises begin to unleash unprecedented value from AI, they can encounter growing risks. Without an AI governance framework, organizations face increased liability, including reputational damage, loss of customer trust, financial losses and regulatory penalties. 

AI governance encompasses the systems, policies and practices that guide the development, deployment and operation of AI technologies to mitigate these risks. 

By implementing an AI governance oversight framework, companies can ensure that AI programs deliver value while effectively addressing potential risks and adhering to regulatory requirements.

Organizations need a holistic and structured approach to deploying AI governance frameworks, as AI systems impact multiple aspects of an organization. This approach requires collaboration from cross-functional teams to design and deploy robust safeguards to address various risks, including privacy, security, legal and operational.

Modern AI-powered data management solutions such as Informatica enable companies to find the right balance between AI-driven innovation and preserve the integrity of their data and AI systems to prevent unreliable outcomes.

For more insights on AI governance and how Informatica can help, visit us at www.informatica.com/data-governance.

Additional AI Governance Resources

eBook: Chart the Course for Responsible AI Governance

Video: Explore AI Governance Essentials: A Back-to-Basics Series – Episode 1

Video: Master AI Governance with Data Discovery and Classification: A Back-to-Basics Series – Episode 2

Webinar: Ready, set, AI: Harnessing responsible AI data governance for better business