Ask most executive teams whether employees are using AI without approval, and you’ll get some version of the same answer. They know it’s happening. They just don’t know how much, by whom, or with what data.
One leadership team I worked with recently said they trusted their people implicitly not to do anything wrong. Implicit trust is a fine starting point for a culture, but it’s not a governance plan.
The biggest AI risk that most CEOs already have has nothing to do with technology. It’s people.
Where a $40 million company found hidden AI risk
Take a $40 million business with a workforce spread across dozens of active client projects and a rotating bench of contractors. Leadership knew AI was in use somewhere, but they’d never looked closely enough to find out where.
The AI Exposure Audit pulled back the curtain. It uncovered a critical level of AI governance exposure, scoring just 74 out of 190 available points. Written policies, human oversight requirements, and employee disclosures were largely absent or applied inconsistently across departments.
The sharpest weak point was third-party and vendor risk, where the audit revealed 22 areas at maximum exposure. Five more sat at high exposure. But here’s the part that really surprised the CEO – the audit effectively told him he didn’t have an AI problem. He had a people problem.
He knew he wasn’t delegating. He knew his team wasn’t communicating on a regular cadence. The team itself was strong, but without structure or alignment at the top, trust between functions was thin, and nobody had real clarity on who owned what.
It’s the kind of gap Patrick Lencioni mapped out years ago in The Five Dysfunctions of a Team: absence of trust, fear of conflict, lack of commitment, avoidance of accountability, inattention to results. An AI governance audit doesn’t set out to measure any of that. It ends up measuring it anyway, because ungoverned AI use is another symptom of a dysfunctional team.
What happened next
None of this means AI was the villain. In fact, once we knew where the exposure existed, AI became the fix by addressing some of the biggest barriers to efficiency.
For instance, the company was juggling 84 active projects at any given time, each somewhere between planned, in progress, stalled, or not yet scheduled. Getting a read on that used to take hours of manual review. AI built a dashboard that categorizes each project as red, yellow, green, with the trouble spots flagged. Now, instead of pulling the report together, the team can take action on the data.
More importantly, the audit helped uncover high-risk areas for regulatory or compliance exposures, so the leadership team could respond proactively instead of getting caught on the defensive if something went wrong.
Across audits like this one, the biggest blindspot is almost always third-party and vendor risk. Leadership can see whether an employee has ChatGPT open on their desktop. They can’t as easily see what data flows through a vendor’s AI feature and what that vendor’s terms actually permit. And, most leadership teams completely overlook the AI already embedded inside software they are already using, like a co-pilot in the CRM or a smart assist feature in the HR platform.
Most vendors mean well, and most say they won’t share your data. But a policy is not a guarantee, and a bug doesn’t check anyone’s terms of service before it leaks something. Waiting to find out what a vendor’s tool actually does after it’s already processing client data is not how you want to uncover a problem.
Guardrails, not a crackdown
Protecting your company requires making the rules of the road visible so everyone knows exactly what is permitted, what is not, and how to make decisions around AI use.
Quick self-check for where you actually stand:
- Do you know which AI tools your team is using today, not which ones you approved?
- Do you have a written AI usage policy, and has anyone actually read it or signed off that they received it?
- Have you reviewed what your existing vendors’ AI features are allowed to do with your data?
- Does anyone outside IT own AI governance as part of their job?
If you answered no to more than one of those, you already have your answer.
An AI Exposure Audit can go even further. It can tell you where you stand today, what tools are already in use, and what the biggest risks are mapped to your business’s regulatory and compliance obligations.
From there, the vulnerabilities get addressed one at a time, or five at a time, at whatever pace the business can handle.
Learn more about the FREE AI Exposure Audit, or book a time with Steve to talk about how to leverage AI in your business safely.