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Demystifying AI for Indian Boards : Using AI to Strengthen Governance and a Culture of Compliance
In today's dynamic Indian business environment, the responsibilities of corporate boards are evolving rapidly. Directors are expected to not only provide strategic oversight and ensure financial stewardship but also to foster a strong culture of compliance, anticipate emerging risks, and uphold ethical standards. Artificial Intelligence (AI) is fast becoming an essential tool in meeting these governance challenges. But for many non-technical board members, AI remains a complex and intimidating concept.
This article aims to demystify AI for non-technical directors in India and demonstrate how it can be a practical, accessible, and transformative tool for improving corporate governance and embedding a culture of compliance at the board level.
AI is not a black box it's a powerful flashlight. It helps Indian boards see risks, opportunities, and patterns that were previously hidden. The future of effective governance lies not in avoiding AI, but in understanding and leading with it.
Why AI Matters to Indian Boards
AI can analyze vast amounts of data quickly, detect patterns invisible to human reviewers, and provide timely insights that inform better decision making. For Indian boards, AI can:
• Highlight emerging compliance risks related to regulations from SEBI, RBI, MCA, and other statutory bodies.
• Monitor internal control effectiveness in real time, including GST filings, ROC submissions, or TDS compliance.
• Surface anomalies in financial or operational data, including vendor fraud or procurement irregularities.
• Assist in evaluating management performance and ethical behavior across decentralized and family-owned enterprises.
These capabilities make AI an invaluable ally for directors looking to fulfill their oversight role more effectively in the Indian regulatory context.
The Myth: AI is only for Technologists
It's a common misconception that only technologists or data scientists can understand or use AI. In reality, board members do not need to know how to code or understand neural networks. What they do need is a working knowledge of how AI can support governance processes, what questions to ask about AI tools, and how to ensure these tools align with corporate values, compliance obligations, and India's regulatory ecosystem.
Key Areas where Indian Boards can Leverage AI
1. Risk Oversight and Early Warning Systems
AI tools can scan internal data (e.g., emails, transactions, system logs) and external data (e.g., MCA updates, SEBI circulars, public media) to detect early signs of reputational, operational, or compliance risks. Boards can receive dashboard reports that flag areas needing attention, helping directors take preemptive action.
2. Continuous Controls Monitoring (CCM)
Rather than waiting for statutory audits or CAG inspections, AI can continuously monitor control environments. For example, it can flag unusual approval patterns, GST misclassifications, unauthorized bank access, or delays in vendor payments. Non-technical Indian board members can use visual dashboards to monitor key risk indicators without needing technical expertise.
3. Enhancing the Audit Committee's Work
Audit committees in Indian companies can benefit from AI tools that:
• Analyze entire populations of financial transactions (beyond audit sampling)
• Detect red flags such as circular transactions, shell entity payments, or related party misreporting
• Identify gaps in documentation or control failures for reporting to
Board members can ask auditors or CFOs if such AI tools are being used and request summarized insights.
4. Board Performance and Ethics Monitoring
AI tools can assess tone-at-the-top and ethical culture by analyzing employee surveys, whistleblower reports, and communication patterns. In India, where promoter-led cultures may dominate, AI provides an unbiased lens into employee sentiment and ethical conduct across levels.
5. Regulatory Change Management
India's regulatory landscape evolves rapidly. AI can monitor and summarize updates from SEBI, RBI, MCA, DIPP, and state governments. This allows directors to stay informed about new obligations and assess whether management is responding appropriately to changes in laws like the Companies Act, FCRA, or Data Protection Bill.
How Non-Technical Indian Directors can engage with AI
You do not need to build the AI - you just need to ask the right questions:
• Is AI being used to monitor compliance and risk areas like GST, insider trading, or ESG disclosures?
• What types of data are being analyzed, and is it ethical and secure under Indian laws?
• How is AI integrated into audit, legal, or compliance workflows?
• Are there any red flags or anomalies identified by AI tools that the board should be aware of?
• How is the effectiveness of AI tools being evaluated, especially in the Indian business context?
Asking these questions signals to management that the board is engaged, curious, and serious about modernizing its oversight role.
Practical Steps for Indian Boards to get Started
1. AI Awareness Sessions: Boards should invest in short, focused workshops (possibly with ICAI, ICSI or NISM) to understand AI use cases and risks.
2. Use Case Identification: Encourage management to identify specific governance or compliance challenges where AI could help, such as CSR compliance or tracking stock exchange disclosures.
3. Pilot Projects: Approve small-scale pilots to test AI tools for specific use cases like policy compliance monitoring or audit trail tracking.
4. Integration into Governance Dashboards: Ensure AI insights are included in the dashboards and reports board members already use.
5. Oversight Policies for AI: Boards should ensure there are internal policies for responsible AI use, aligned with Indian legal, privacy, and ethical norms.
Ethical and Oversight Considerations
AI can introduce risks if not carefully managed. Indian boards should ensure:
• AI tools are free from caste, gender, or regional biases and aligned with company values.
• Decisions made or supported by AI are explainable under Indian jurisprudence.
• There is human oversight in all critical decisionmaking processes.
Boards must also ensure that privacy, cybersecurity, and data protection standards are met when AI interacts with employee, vendor, or customer data—especially with the anticipated enforcement of India's Digital Personal Data Protection Act (DPDPA).
The Strategic Advantage
Directors who understand how to use AI as a governance tool will be better equipped to:
• Anticipate compliance failures (e.g., delayed statutory filings, missed RBI reporting)
• Support ethical corporate behavior, even in promoter-driven entities
• Foster a proactive risk culture in family-owned, listed, or startup boards
• Drive transparency and accountability across the organization
More importantly, they will fulfill their fiduciary duty with greater insight, agility, and foresight.
Conclusion: AI is for Every Indian Board
The Indian boardroom is no longer a place that can operate without technological literacy. But that doesn't mean every director must be a data scientist. By learning how AI works at a strategic level and asking the right questions, non-technical Indian directors can harness AI to make governance smarter, compliance stronger, and culture more resilient.
AI is not a black box - it's a powerful flashlight. It helps Indian boards see risks, opportunities, and patterns that were previously hidden. The future of effective governance lies not in avoiding AI, but in understanding and leading with it.
The message is clear: AI is not just for technologists; it is for every Indian board member committed to better oversight, better decisions, and a better future for their organization.
Back to HomeAuthor
Dr. Puneet Gupta
He has close to three decades of professional and academic experience across India and North America. He serves on various boards including UTI Pension, Fusion Finance, and NCDEX eMarkets, and Meta Materials Circular Markets. He is an advisor to ONGC and a startup fund with over twenty portfolio companies in sustainability, alternative energy, and green technologies. He has been the co-founder of SimpliLend and serves as a professor of practice and has delivered lectures at various business schools and executive programs.
Owned by: Institute of Directors, India
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