Artificial intelligence is rapidly becoming part of the technology ecosystem that powers financial institutions. From cybersecurity and fraud prevention to compliance monitoring and operational efficiency, AI is creating new opportunities to improve processes, enhance decision-making, and support organizational growth.
AI affects everything from data security and vendor management to regulatory compliance and business continuity. As a result, governance has become a critical component of any financial institution’s AI journey.
Board members do not need to be technical experts to provide meaningful oversight. Their responsibility is to ensure the institution has the appropriate governance framework, accountability structure, and risk management processes needed to support the responsible use of AI.
The following questions can help guide those conversations.
1. Do We Have an AI Strategy?
Many financial institutions are exploring AI capabilities, but successful adoption begins with a clear understanding of how the technology supports broader business objectives.
Board members should understand how AI aligns with the institution’s strategic priorities, whether those priorities involve enhancing member service, improving operational efficiency, strengthening cybersecurity programs, supporting compliance efforts, or identifying growth opportunities. They should also understand how management plans to measure success and evaluate outcomes.
For some institutions, AI may help streamline security operations and threat detection. For others, the initial focus may be on compliance monitoring, fraud prevention, member service, or employee productivity. A defined strategy helps organizations prioritize investments, allocate resources effectively, and focus on initiatives that deliver measurable value.
2. Do We Have a Formal AI Policy?
A governance framework starts with clear expectations.
An AI policy should establish guidelines for acceptable use, define approval requirements for new tools, address data privacy and security considerations, and outline responsibilities across the organization. It should also provide direction regarding employee use of AI applications, retention of information, vendor oversight, and risk management processes.
For financial institutions operating in a highly regulated environment, documented policies help create consistency and demonstrate that AI adoption is being approached in a thoughtful and controlled manner.
As AI capabilities become more common across business functions, having clear standards in place helps support accountability and informed decision-making.
3. Who Is Accountable for AI Oversight?
Effective governance requires clearly defined ownership.
While technology teams often lead implementation efforts, AI governance extends beyond IT. Risk management, compliance, information security, legal, internal audit, and business leadership all play important roles in evaluating and managing AI-related risks.
Boards should understand who is responsible for AI oversight, how decisions are made, and what governance structure is in place to support ongoing monitoring and reporting. Some institutions have established dedicated AI governance committees, while others incorporate AI oversight into existing technology, risk, or compliance committees.
Clear accountability helps ensure that risks, opportunities, and emerging issues receive appropriate attention as AI usage expands.
4. Do We Know What AI Tools Are Being Used Across the Organization?
Visibility is essential for effective governance.
Organizations often discover that AI adoption occurs in multiple areas at once. Employees may experiment with productivity tools, departments may implement AI-enabled software, and vendors may introduce new AI functionality into existing platforms.
This is particularly important for financial institutions, where even well-intentioned use of AI tools can create concerns related to confidential information, member data, or regulatory compliance.
Boards should ask whether management maintains an inventory of approved AI tools, understands where AI is being used, and evaluates the risks associated with those applications. An accurate inventory creates a foundation for oversight, risk assessments, and future policy decisions.
5. Do We Have a Process for Reviewing & Approving New AI Solutions?
The AI marketplace continues to evolve at a rapid pace, bringing a steady stream of new tools and capabilities.
A formal evaluation process helps institutions assess potential benefits alongside cybersecurity, privacy, compliance, operational, and reputational considerations. Due diligence should be completed before implementation, with appropriate stakeholders involved in the review process.
Financial institutions should also consider how AI solutions access, store, process, and protect information, as well as how those solutions align with existing governance and security requirements.
A structured approach allows organizations to pursue innovation while maintaining sound governance practices.
6. How Are We Protecting Sensitive Information?
Data governance remains one of the most important areas of AI oversight.
Financial institutions are entrusted with highly confidential information, making data protection a critical consideration in any AI initiative. Employees need clear guidance regarding what information can be entered into AI systems and which tools are approved for business use.
Organizations should also implement technical controls, monitoring processes, and ongoing training programs that support responsible AI usage. These discussions should include data access, retention, security controls, employee awareness efforts, and procedures for handling sensitive information.
Board members should understand how management is safeguarding member information, proprietary business data, and other confidential records as AI adoption expands throughout the organization.
7. Which of Our Vendors Are Using AI?
AI governance extends beyond internally deployed solutions.
Banks and credit unions rely on a broad network of core processors, digital banking providers, cybersecurity vendors, fintech partners, and other third parties. Increasingly, these vendors are embedding AI capabilities into products and services that institutions already use.
Boards should understand which critical vendors have incorporated AI into their offerings, how those capabilities are governed, what data is being used, and whether vendors provide transparency when introducing new AI functionality.
Vendor due diligence conversations should include questions about AI risk management, data protection practices, security controls, model governance, and ongoing monitoring. These discussions can provide valuable insight into third-party risk and help identify areas where additional oversight may be warranted.
8. Is AI Included in Board Reporting?
As financial institutions continue to expand their use of AI, boards need regular visibility into how the technology is being deployed and managed.
Periodic reporting may include:
- Approved AI tools and applications
- Active pilot programs
- Vendor AI developments
- Emerging risks or incidents
- Governance and compliance updates
- Risk assessment results
- Performance metrics and business outcomes
- Employee training and awareness initiatives
Regular updates help board members remain informed and support ongoing discussions about risk, strategy, operational impact, and future opportunities.
Governance Before Adoption
Artificial intelligence will continue to influence how financial institutions operate, serve members, manage risk, and respond to emerging challenges. As new tools enter the market and existing vendors expand their AI capabilities, governance will play an increasingly important role in guiding adoption decisions.
Asking thoughtful questions about strategy, accountability, data protection, vendor management, and reporting helps create the foundation for informed decision-making as AI becomes more integrated into day-to-day operations.
If you have any questions, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
