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Board Governance : In the Era of Artificial Intelligence
By- Institute of Directors | Authored by- Mr. Dharmarajan Sankara Subrahmanian
May 08, 2025
As AI becomes increasingly embedded in the core of business strategy, board governance must evolve to keep pace. Here are key areas where boards must focus to guide their organisations through this AI-driven era effectively.
Key Considerations for Boards
• Develop a basic understanding of AI technologies, their capabilities, and limitations to be able to use AI in optimizing production processes, or healthcare, where AI assists with diagnostic accuracy.
• Long-term Impact of AI on the competitive landscape.
• Readiness to implement AI initiatives and manage AI-driven transformation effectively.
The future of AI is unfolding rapidly, and those boards that are proactive, informed, and ethically grounded will be the ones that lead their organisations into the next era of innovation.
Key Risks to Address
Boards need to ensure robust data protection protocols are in place and that compliance with regulations such as GDPR in Europe and India's Digital Personal Data Protection Act (DPDPA) 2023 is maintained across sectors, including finance, healthcare, and manufacturing. Non-compliance can lead to significant penalties, damaging the company's reputation and bottom line. Both GDPR and DPDPA focus on Ensuring lawful, transparent, and fair data processing, Granting individuals' rights over their personal data, and Imposing stringent data breach notification rules and requiring businesses to implement robust privacy policies.
What Boards can do
• Demand regular updates from management on AI-related risks specific to their industry.
• Encourage investment in internal or external AI audits to ensure transparency and accountability.
• Foster a culture where responsible AI usage is prioritised alongside innovation.
Ethical Considerations for Boards
AI's growing role across sectors whether in healthcare, finance, manufacturing, or services brings increased scrutiny around its ethical implications. Boards must champion ethical AI practices to build trust with customers, employees, investors, regulators, and society at large by ensuring transparency, inclusivity and sustainability in its operations and disclosures.
Actionable Steps for Boards
• Establish or endorse an ethical AI framework that defines the company's principles for AI usage across all industries.
• Appoint an AI ethics committee to oversee major AI initiatives and ensure they adhere to ethical guidelines.
Workforce Considerations
• Upskilling and Reskilling
• Change Management
Board Responsibilities
• Oversee talent development strategies to ensure they are aligned with AI goals.
• Ensure leadership prioritizes DEI in AI transformation.
What Stakeholders want to know?
• Customers: How is AI being used to improve services in healthcare, finance, or manufacturing while safeguarding data privacy and fairness?
• Investors: How does AI contribute to long-term value creation in industries such as finance or conglomerates, and how are associated risks being managed?
• Regulators: Is the company compliant with AIrelated regulations, such as GDPR and DPDPA, and how are ethical concerns being addressed?
Key Board Actions
• Encourage management to develop clear, consistent messaging around AI initiatives.
• Engage with regulators to ensure compliance with evolving AI-related laws and standards.
The future of AI is unfolding rapidly, and those boards that are proactive, informed, and ethically grounded will be the ones that lead their organisations into the next era of innovation.
Back to HomeAuthor
Mr. Dharmarajan Sankara Subrahmanian
He is the Founder & CEO, Impactsure Technologies Private Limited and is a Fellow Member of the Institute of Directors.
Owned by: Institute of Directors, India
Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.
