Not long ago, phishing emails were easy to spot. The language was clumsy, the tone felt off, and the sender’s address gave it away.
Those signals are fading fast. Bad actors now use AI to craft messages that are polished, persuasive, and harder than ever to detect.
AI is also transforming how companies manage risk. It flags anomalies in network traffic, predicts attacks before they happen, and streamlines compliance processes that once took weeks. It’s even making training more engaging through realistic simulations and phishing drills. In short, AI is helping organizations move from reactive defense to proactive resilience.
But the same technology that helps us can hurt us. The tools that strengthen defenses also enable more sophisticated threats. Generative AI is already powering phishing campaigns convincing enough to mimic someone’s voice and speaking style. Deepfakes are so realistic they can fool seasoned professionals. And AI-powered attacks don’t need a human operator. They can scale at machine speed.
The legal and financial implications are enormous. Consider Google and Meta, which recently agreed to pay $1.4 billion each to settle claims about how they collected and used personal data without permission. Those cases weren’t about AI, but they underscore a critical point: When technology outpaces governance, the cost of getting it wrong can be staggering.
Managing Cyber Liability Risk with Governance
For risk and legal leaders, the rise of AI means it can’t be handled in isolation. Governance must be coordinated — risk, legal, IT, and the C-suite working together to set policies, monitor usage, and educate employees.
Shadow AI, tools adopted without IT approval, is a growing blind spot. Do you know where AI already lives in your workflows?
Insurance can help, but most cyber liability policies weren’t designed with AI in mind. Carriers are already asking tougher questions. If your finance team relies exclusively on AI for audits and an error slips through, will your policy respond? Maybe not. Some insurers are exploring AI-specific exclusions or requiring proof of human oversight for sensitive processes. It’s a “wait and see” moment, but the direction is clear: Coverage terms will evolve as AI becomes more entrenched in business operations.
Five Ways to Strengthen Your Cyber Liability Risk Strategy
AI brings enormous potential and equally significant risk. Here are five steps you can take now to strengthen your defenses:
1. Audit your AI use
Map where AI is in play across your organization, both officially and unofficially. Shadow AI is real, and employees often adopt tools without IT approval, creating blind spots that can lead to security vulnerabilities and compliance gaps. Make this a cross-functional effort with input from risk, legal, and IT.
2. Update your governance framework
Define accountability. Policies should clearly define how data privacy, model integrity, and human oversight are managed. Assign roles and responsibilities: Who approves AI use? Who monitors compliance? Who owns the response plan if something goes wrong?
Employees need clear guidance, too. Establish an Acceptable Use Policy that defines how AI tools should be used responsibly and require all employees to review and acknowledge it annually to reinforce their role in helping protect the company.
3. Engage your carrier early
Don’t wait for renewal to ask hard questions. Ask now how your policy responds to AI-related incidents. Are there exclusions for automated decision-making? Do you need endorsements for risks like adversarial attacks or data poisoning? The answers may surprise you, and they’ll shape your risk strategy.
4. Invest in workforce education
Technology alone won’t protect you. Employees are your first line of defense. Regular phishing simulations, deepfake awareness training, and clear escalation protocols can dramatically reduce your exposure.
5. Benchmark and reassess annually
Your cyber policy is locked in for a year, but your risk profile isn’t. If you’ve added new AI-driven processes or taken on more sensitive data, your coverage may no longer fit. Benchmark against peers and review your limits and retentions regularly.
Securing the Future
AI isn’t going away and neither are the risks. The companies that thrive will embrace AI’s potential while managing its downsides. This requires thoughtful integration, anticipating potential pitfalls, and building organizational resilience at every level.
If you’d like a partner in navigating AI and other evolving risks, just reach out to our team at Sequoia — we’re here to help.
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