The AI Governance Gap Is Real — And Risky

A critical look at the disparity between AI adoption and the policies meant to control it.

Author

Nishant Bhaskar
June 20, 2025 • Estimated Reading Time: 4 minutes

AI is already everywhere in legal and business operations.

But the guardrails? Still missing in most places.

According to the new AI Governance Gap report from LegalFly:

  • 90% of organizations use AI daily

  • But only 18% have a fully implemented AI policy

We’re moving faster than we can govern and the gap is getting wider.

That’s the key finding from the report based on responses from 154 general counsel across the UK, France, and Germany:

“AI is now central to business operations, but most organisations lack the governance needed to manage its risks responsibly.”

The Velocity-Governance Paradox

AI adoption is exploding across departments, including legal.

But oversight hasn’t caught up. Most governance is fragmented, informal, or nonexistent.

This creates three major risks:

  1. Shadow AI tools used without approval

  2. Sensitive data fed into unsecured systems

  3. No clear ownership of responsibility

This isn’t just a compliance issue. It’s a reputational, regulatory, and client trust risk.

Key Stat: Client Data Is at Risk

  • 34% of organizations use AI on sensitive client or vendor data

  • Yet nearly 30% of AI policies don’t even address data protection

That’s a governance time bomb. Especially for legal teams.

The 6 Pillars of Proactive AI Governance

Here’s a clear and practical path forward, drawn from the report:

  1. Spot Shadow AI: Map out where AI tools are already in use — even unofficial ones. Visibility is step one.

  2. Adopt a Common Framework: Use NIST’s AI Risk Management Framework to align legal, IT, compliance, and business teams.

  3. Embed Safeguards: Build access controls and data minimization directly into workflows. Governance can’t live in a PDF.

  4. Anonymize by Default: Strip out sensitive data before sending anything to AI systems. Prevent risk at the source.

  5. Treat Model Misuse as Security Threat: Attacks like prompt injection aren’t just clever tricks — they’re serious vulnerabilities.

  6. Offer Approved Alternatives: Replace risky tools with sanctioned ones that are monitored and easy to use. Ban less, enable more.

These are the building blocks of meaningful AI governance — moving from abstract principles to concrete, repeatable actions.

Takeaway: Governance Is the Enabler — Not the Enemy

Too many teams treat governance like red tape.

In reality, it’s the key to safe, scalable adoption.

If you want your legal team to use GenAI — to draft, redline, analyze, or advise — you need frameworks that are:

  • Simple

  • Practical

  • Embedded into daily work

This is what separates teams that experiment from those that transform.

Want to Dive Deeper?

Read the full AI Governance Gap report by LegalFly here.

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