Introduction

AI governance doesn't need to be a 200-page policy document. For mid-market companies, effective governance means clear accountability, proportionate risk management, and practical guardrails that don't slow innovation to a crawl.

Good governance is invisible when it works. You'll notice it when things go wrong and nobody knows who's responsible.

1. Governance Structure

The AI Steering Committee

Establish a cross-functional committee of 4–6 people meeting monthly. Include representation from:

Executive sponsor — typically COO or CTO
Legal/Compliance — for regulatory awareness
Operations lead — closest to day-to-day impact
IT/Data lead — for technical feasibility
HR representative — for workforce implications

2. Risk Classification

Categorise every AI use case into three tiers:

Risk Tiers

Tier 1 (Low Risk): Internal productivity tools, content drafting, data summarisation. Requires team lead approval only.
Tier 2 (Medium Risk): Customer-facing automation, data analysis for decisions, process automation. Requires steering committee review.
Tier 3 (High Risk): Hiring decisions, financial modelling, health/safety applications. Requires full impact assessment + board awareness.

3. Data Governance Principles

Every AI deployment must answer these four questions:

What data does it access, and is that data classified correctly?
Where is the data processed and stored?
Who has access to inputs and outputs?
How long is data retained, and how is it deleted?

4. Accountability Framework

For each AI system in production, assign:

System Owner: Accountable for business outcomes and risk
Technical Owner: Responsible for performance, uptime, and security
Ethics Reviewer: Conducts periodic fairness and bias audits

5. Review Cadence

Implement a quarterly review cycle for all Tier 2 and Tier 3 systems covering performance metrics, incident reports, user feedback, and compliance status.

Getting Started

First Step

Start with an inventory of all AI tools currently in use — including “shadow AI” (tools employees have adopted independently). This inventory alone often reveals governance gaps that need immediate attention.

AI Governance Framework for Mid-Market Companies