Artificial Intelligence is transforming business at unprecedented speed. Employees are using generative AI, organizations are embedding AI into critical processes, and technology vendors are rapidly introducing AI-powered capabilities into everyday platforms. Yet while AI adoption is accelerating, governance, risk management, and oversight frameworks are struggling to keep pace.

This growing gap presents one of the most significant governance challenges facing boards today. AI introduces risks that span financial reporting, cybersecurity, regulatory compliance, operational resilience, decision-making, and reputation. Unlike traditional risks, AI-related exposures can emerge rapidly and spread across multiple business functions before they are detected.

The fundamental question for boards is no longer whether the organization is using AI. It is whether AI is being governed effectively.

Organizations that succeed in the AI era will not necessarily be those that adopt AI the fastest. They will be those that establish clear accountability, robust oversight, effective controls, and independent assurance over AI-enabled activities. In the future, competitive advantage will be determined not only by innovation, but by governance excellence.

The Growing Governance Gap 

Just a few years ago, AI was largely viewed as a tool for productivity, automation, and competitive advantage. Today, it has become a strategic governance issue requiring active oversight from Boards, Audit Committees, CEOs, CFOs, and Internal Audit functions.

Most organizations have mature governance frameworks, internal controls, cybersecurity programs, and compliance processes. However, these frameworks were developed for a world where change was predictable and risks evolved gradually. AI changes that reality.

AI can learn, generate content, influence decisions, and scale across an organization almost instantly. As a result, risks that once developed over months can now emerge within days.

Some recent studies reinforce this concern:

• 85% of internal audit leaders view AI-enabled fraud as a moderate to high risk.
• 66% of boards report limited or no meaningful AI knowledge.
• 31% of boards have yet to place AI on their formal agenda.
• The use of AI within Internal Audit is expected to increase significantly over the next few years.

The message is clear:

AI adoption is outpacing AI governance.

Three Critical Risks, Boards Should Not Ignore

1. AI Risk Is Primarily a People Risk

Many organizations focus on technology while overlooking employee behavior. Employees may already be using public AI platforms to draft reports, analyze sensitive data, prepare board papers, and support business decisions, often without formal approval, visibility, or controls. The greatest vulnerability may not be the AI itself, but how people use it.

2. AI Can Undermine Controls While Improving Efficiency

AI can enhance productivity, but it can also blur accountability. When AI generates forecasts, recommendations, analyses, or approvals, organizations may struggle to identify who owns the decision and who is accountable for the outcome. If management cannot explain how a critical decision was reached, governance risks inevitably increase.

3. Governance Maturity Often Lags Adoption Maturity

Many organizations are integrating AI into daily operations faster than they are developing governance frameworks to oversee it.

This creates "hidden risks" that sit outside traditional risk assessments, monitoring mechanisms, and assurance programs until a problem occurs.

What Boards Should Be Asking

Boards should move beyond asking, "Are we using AI?"

Instead, they should ask, "Where is AI already influencing decisions, risks, and outcomes across the organization?"

Board oversight should ensure that:

• AI Governance is a standing agenda item.
• AI risks are incorporated into Enterprise Risk Management.
• Accountability and ownership are clearly defined.
• AI-related risks are regularly monitored and reported.
• Independent assurance is provided over critical AI applications.

The Leadership Imperative

Audit Committees should challenge whether:

• AI risks are included in risk assessments.
• Internal controls address AI-generated outputs.
• AI models are independently validated.
• Cybersecurity controls adequately mitigate AI-related risks.
• Internal Audit possesses sufficient AI capability and expertise.

As finance functions increasingly leverage AI for forecasting, reporting, reconciliations, and decision support, CFOs must ensure:

• Transparency of AI-generated outputs.
• Robust financial controls.
• Validation of AI-assisted models.
• Appropriate governance over AI-enabled financial processes.

Professional judgement remains essential. AI should enhance expertise, not replace it.

CEOs ultimately shape organizational culture. If AI is viewed solely as a productivity initiative, governance will inevitably lag adoption. Leaders must foster a culture where innovation, accountability, risk intelligence, and responsible AI usage coexist.

The Future of Internal Audit

The future role of Internal Audit is not limited to auditing AI systems. It is to provide independent assurance that AI governance, risk management, and control frameworks are operating effectively. To provide best internal audit outcome, it requires new skills, new methodologies, and closer collaboration across Risk Management, IT Audit, Cybersecurity, and Compliance functions.

The greatest AI risk is not the technology itself. It is the belief that someone else is managing it.

As AI continues to reshape business, governance can no longer remain a step behind innovation. Boards that establish clear oversight, accountability, and assurance today will be best positioned to capture AI's benefits while protecting stakeholder value tomorrow.

What Baker Tilly UAE can offer

Baker Tilly UAE helps organizations strengthen AI Governance, Enterprise Risk Management, Internal Audit, IT Audit, Cybersecurity oversight, and Governance Framework maturity. Through practical, risk-focused reviews aligned with leading global standards and best practices, we help Boards and executive teams harness the benefits of AI while managing its risks with confidence.