In-House Counsel Report Companies Are Doing AI All Wrong

Why It Matters

Without proactive AI risk assessment, firms risk regulatory penalties, operational failures, and reputational damage, making AI governance a strategic imperative for legal and business leaders.

Key Takeaways

• 35% say AI growth outpaces internal controls.
• Many counsel assess AI only after deployment.
• Post‑deployment reviews increase compliance risk.
• Proactive governance reduces liability and reputational damage.
• Survey underscores need for AI risk frameworks.

Pulse Analysis

The race to embed artificial‑intelligence tools into everyday business processes has accelerated dramatically over the past two years. According to a recent Paragon Legal survey of U.S. in‑house lawyers, 35 % of respondents say AI adoption is outpacing the development of internal controls, and a sizable portion admit they are only asked to evaluate an AI system after it has already been rolled out. This post‑deployment approach flips the traditional risk‑management playbook on its head, leaving companies vulnerable to unforeseen bias, data‑privacy breaches, and algorithmic errors before the legal team can intervene.

Regulators are catching up fast. The U.S. Federal Trade Commission, the European Union’s AI Act, and sector‑specific guidelines from the SEC and FINRA all stress the importance of pre‑emptive risk assessments for high‑impact AI models. When counsel is brought in after deployment, they must scramble to retroactively map liability, document compliance steps, and advise on remediation—tasks that are far more costly and less effective than a structured, upfront review. The survey’s findings therefore signal a looming compliance gap that could translate into fines, litigation, or reputational harm.

To close the gap, companies should institutionalize an AI governance framework that mirrors traditional technology risk processes. This includes mandatory impact assessments before procurement, cross‑functional review boards that include legal, security, and data‑science stakeholders, and continuous monitoring for drift or unintended outcomes. In‑house counsel can lead the effort by drafting clear policies, training business units on ethical AI use, and establishing audit trails that satisfy both internal auditors and external regulators. As AI becomes a core competitive differentiator, proactive legal oversight will shift from a defensive necessity to a strategic advantage.