Vijhai Grayan
Senior Legal Counsel
at AvePoint
Written by
A decade ago, the phrase “data breach” could send a chill through any in-house legal team. Today, another expression is quietly taking its place in boardrooms and risk reports alike: “AI incident.”
AI is increasingly becoming the core of modern enterprise. It drafts correspondence, evaluates performance, screens job candidates, and predicts demand. It does this quietly, invisibly, and without hesitation or verification. Over the next decade, it will evolve from a promising experiment into an operational necessity. The impact can be powerful, but the potential risks can also be catastrophic.
A new class of risk
The central fear in boardrooms is shifting. It is moving beyond weak security protocols or hackers exploiting third-party call center tools. The threat is now coming from inside the house; it’s already being embedded quietly within our systems, learning our habits and mimicking our judgment.
It learns. It improves. It guesses. But sometimes it guesses wrong.
And when it does, it does so with breathtaking confidence. It writes incorrect statements as if they were gospel. It offers false comfort, dressed up in perfect grammar, and it never sounds uncertain. That’s the problem.
“This is new terrain for in-house counsel. We stand between machine logic and human accountability.”
Vijhai Grayan, Senior Legal Counsel at AvePoint
When one of Canada’s major airlines’ AI-powered chatbot assured passengers they were entitled to refunds, it did so with absolute conviction. It was wrong. And not just once; repeatedly, across countless customers. The airline tried to argue that it couldn’t be held responsible for what “the chatbot said,” as though the machine were an independent contractor that had gone rogue. The court took a different view.
The judgment should send ripples through in-house teams; accountability cannot be automated. You can delegate tasks to technology, but not responsibility. Every organization experimenting with AI has essentially built a colleague that never sleeps, never doubts, and never hesitates, yet still requires constant oversight.
In-house teams as first responders
When intelligent systems fail, the first call is to legal, the team trusted to clean up the mess. In-house lawyers are uniquely equipped to bridge the gap between technical failure and governance response. We are the ones asked to make sense of the mess: to work out what went wrong, who is responsible, and how to tell the truth without tanking the company’s reputation.
This is new terrain for in-house counsel. We stand between machine logic and human accountability. Responses require calm, clarity, and the ability to explain the inexplicable in plain English. These are core competencies of the legal profession, and they position counsel as the natural leaders in any coordinated AI incident response.
Creating an AI incident playbook
Every organization should know what to do when its “intelligent” systems fail. It calls for a real operational playbook.
Preparation begins with visibility. Every organization should maintain a current inventory of all AI tools in operation and monitoring to detect those introduced informally by employees. These unsanctioned applications, often referred to as “shadow AI,” present some of the most significant risks because they operate without established oversight.
Next comes ownership. Every system needs a (real person’s) name beside it. Someone who understands what the AI tool does and how to pull the plug when needed.
Once an irregularity occurs, the first priority is containment: isolate the tool, preserve relevant data, and assemble a cross-functional response team involving legal, technology, communications, and risk leaders.
Transparency follows. Regulators, clients, and the public value accuracy and timeliness over deflection. Attempts to shift responsibility to the technology itself erode confidence. Clear communication that explains the cause, the response, and the preventive measures being implemented helps rebuild trust and demonstrates maturity.
Every incident, regardless of scale, offers insight. The most resilient companies treat each event as a feedback opportunity, strengthening policies, contracts, and employee training. A culture that views incidents as learning catalysts rather than reputational threats develops both agility and credibility.
Practical actions for in-house counsel
If you want to start somewhere practical, try this. Gather your leadership team and ask, “What is our plan if our AI tool leaks client data tomorrow?”
You’ll see how quickly the room goes quiet.
That silence is the sound of a gap. A gap that in-house teams can fill. This is what modern in-house leadership looks like in the next decade.
The pathway to readiness is entirely achievable within existing capabilities. A concise internal response guide (focused on the first 72 hours of action) provides structure when decisions must be made quickly.
Awareness is equally critical. Inviting staff to discuss potential AI challenges builds understanding and confidence. The objective is to create a culture where employees feel empowered to escalate issues early and where ethical use of AI becomes an expectation. By framing AI incident readiness as part of broader business continuity planning, in-house lawyers reinforce their role as strategic advisors.
The opportunity hidden in the chaos
Every technological leap creates a profession within a profession. AI is doing that for in-house lawyers.
We are becoming the interpreters between technology and trust. We are shaping the language of responsibility in a world where systems learn faster than people. AI incidents are beginning to occupy the same space data breaches once held: first rare, then routine, and ultimately a defining measure of organizational integrity. Enterprises that combine legal insight with technical awareness will navigate this transition most effectively. They will recognize that intelligent systems require equally intelligent oversight.
