AI Risk Management: What Law Firms Need to Prioritise Now

Artificial intelligence has moved from a niche innovation to a core consideration in how insurers, regulators and clients assess a law firm’s risk profile. With PII renewal forms now focusing on AI use, firms can no longer treat the technology as an informal experiment.

Recent cases involving fabricated citations and the mishandling of client information highlight the central point: AI is not the problem—ungoverned AI use is. Regulators remain clear that confidentiality, informed consent and professional judgement apply regardless of the tools used.

Insurers broadly support AI adoption but want assurance that firms have structure and oversight in place. They expect clarity in areas such as:

• A clear AI policy
• Risk and compliance oversight
• Human verification of AI‑supported work
• Controls to prevent data leakage
• Clear accountability

A blanket claim of “we don’t use AI” no longer reassures insurers or regulators. More often, it signals a lack of visibility over staff behaviour and unmonitored tool use.

Regulatory guidance continues to emphasise that AI does not alter a solicitor’s professional obligations. Responsibility for accuracy, confidentiality and client protection remains firmly with the practitioner.

Integrating AI into the Risk Framework

To meet these expectations, firms must embed AI into their broader governance and risk structures – not just their technology strategy.

1. Add AI‑related risks to the firm’s risk register – Data leakage, hallucinated outputs and uncontrolled tool use should be formally identified and monitored.
2. Define permitted, restricted and prohibited uses – Clear rules help prevent unsafe or inconsistent behaviour.
3. Require human‑in‑the‑loop review – All AI‑supported legal work must be checked and approved by qualified professionals, with audit trails retained.
4. Assign clear governance roles- Risk & Compliance, IT, the COLP and supervising partners must all have defined responsibilities.
5. Provide secure, approved AI tools – Offering firm‑vetted solutions minimises the risk of staff turning to public, unsecure platforms.
6. Train staff on capability and risk- Training should cover confidentiality, verification and escalation – not just functionality.
7. Monitor and audit usage- Usage logs, audit checks and incident reporting provide evidence of active oversight.
8. Address AI use in client engagement- Clients may expect transparency. Firms should consider when consent is needed and how AI use is communicated.
9. Review the framework regularly- AI evolves quickly; governance must evolve with it.

AI is now firmly embedded in risk assessments across the profession. The firms that proactively manage it – through governance, training and transparent controls – will earn trust, reduce exposure and remain aligned with insurer and regulatory expectations.

If you would like to discuss any of the themes raised in this blog please contact me at ih@hopkinslegalconsulting.co.uk or 07916669095.