Executive Overview

As AI adoption accelerates, legal and compliance teams need frameworks to assess risk, ensure regulatory compliance, and establish governance protocols. This guide provides actionable templates and checklists aligned with current regulations.

Regulatory Landscape

AI regulations vary by jurisdiction. This guide covers general principles applicable across most frameworks including EU AI Act, US executive orders, and sector-specific requirements.

Risk Assessment Matrix

High-Risk AI Applications

Applications requiring enhanced due diligence and documentation:

Employment decisions: Hiring, promotion, termination algorithms
Credit scoring: Loan approval, creditworthiness assessment
Healthcare: Diagnosis, treatment recommendations
Legal: Sentencing recommendations, risk assessment
Biometric identification: Facial recognition, behavioral analysis

✓Document intended use case and scope limitations
✓Establish human oversight requirements
✓Implement audit trails for all decisions
✓Create appeals/correction processes
✓Maintain version control and change logs

Compliance Checklist

Data Protection (GDPR/CCPA)

Legal Basis

[ ] Identify lawful basis for processing (consent, legitimate interest, contract)
[ ] Document data minimization strategies
[ ] Implement purpose limitation controls
[ ] Establish retention policies

Individual Rights

[ ] Right to explanation procedures
[ ] Data portability mechanisms
[ ] Deletion/correction workflows
[ ] Opt-out processes

Technical Measures

[ ] Privacy by design implementation
[ ] Data protection impact assessments (DPIA)
[ ] Encryption at rest and in transit
[ ] Access control and audit logging

AI-Specific Regulations

EU AI Act Alignment

[ ] Risk categorization completed
[ ] Conformity assessment for high-risk uses
[ ] Technical documentation package
[ ] Quality management system
[ ] Post-market monitoring plan

US Federal Guidelines

[ ] NIST AI Risk Management Framework adoption
[ ] Sector-specific compliance (HIPAA, FCRA, etc.)
[ ] Federal acquisition regulation compliance
[ ] Executive Order 14110 requirements

Governance Framework

AI Ethics Board Structure

Composition

Legal/Compliance representative
Data Protection Officer
Technical/Engineering lead
Business stakeholder
External ethics advisor (optional)

Responsibilities

Review high-risk use cases
Approve deployment decisions
Monitor compliance metrics
Investigate incidents
Update policies quarterly

Documentation Requirements

“
"Documentation isn't just compliance—it's your defense in litigation. Every AI decision needs a paper trail showing human oversight and bias testing."
”

Legal advisor

Mandatory Records

Model cards with performance metrics
Training data provenance
Bias testing results
Human review logs
Incident reports
User complaints

Vendor Management

Due Diligence Checklist

Technical Assessment

[ ] Model transparency and explainability
[ ] Performance benchmarks and limitations
[ ] Bias testing methodologies
[ ] Security certifications (SOC2, ISO 27001)

Contractual Provisions

[ ] Liability allocation
[ ] Indemnification clauses
[ ] Audit rights
[ ] Data ownership and portability
[ ] Termination and transition assistance

Ongoing Monitoring

[ ] Service level agreements (SLAs)
[ ] Performance metrics reporting
[ ] Compliance attestations
[ ] Incident notification procedures

Incident Response Plan

Classification Matrix

| Severity | Examples | Response Time | Escalation | |----------|----------|---------------|------------| | Critical | Discriminatory outcomes, data breach | Within 2 hours | C-suite, regulator | | High | Significant errors, compliance violation | Within 8 hours | Legal, senior mgmt | | Medium | Performance degradation, user complaints | Within 24 hours | Department head | | Low | Minor bugs, documentation gaps | Within 72 hours | Team lead |

Response Protocol

Phase 1: Immediate Actions (0-2 hours)

Isolate affected systems
Preserve evidence
Initial impact assessment
Stakeholder notification

Phase 2: Investigation (2-24 hours)

Root cause analysis
Scope determination
Regulatory assessment
Legal privilege considerations

Phase 3: Remediation (24-72 hours)

Corrective actions
System updates
Process improvements
Documentation updates

Phase 4: Post-Incident (72+ hours)

Lessons learned
Policy updates
Training requirements
Compliance reporting

Regulatory Reporting

Notification Requirements

Data Protection Authorities

Breach notification: 72 hours (GDPR)
Annual compliance reports
DPIAs for high-risk processing

Sector Regulators

Financial services: Prudential reporting
Healthcare: Patient safety events
Employment: EEOC reporting

Internal Reporting

Board quarterly updates
Risk committee monthly reports
Ethics board case reviews

Template Library

Model Risk Assessment Form

## AI System Risk Assessment

**System Name:** [Name]
**Date:** [Date]
**Assessor:** [Name]

### Use Case Analysis
- Primary function:
- User population:
- Decision impact:
- Automation level:

### Risk Scoring (1-5)
- [ ] Discrimination potential:
- [ ] Privacy impact:
- [ ] Safety implications:
- [ ] Financial exposure:
- [ ] Reputational risk:

### Mitigation Measures
- Human oversight:
- Testing frequency:
- Audit requirements:
- Documentation needs:

### Approval
- Risk owner signature:
- Legal review:
- Compliance sign-off:

Quick Reference

Red Flags Requiring Legal Review

Escalate Immediately

These scenarios require immediate legal consultation before proceeding:

Processing special category/sensitive personal data
Automated decision-making with legal effects
Cross-border data transfers
Children's data processing
Novel use cases without precedent
Third-party data sharing
Facial recognition or biometric processing
Predictive analytics for protected characteristics

Compliance Metrics Dashboard

Key Performance Indicators

Percentage of AI systems with completed DPIAs
Average time to incident resolution
Number of user complaints/appeals
Audit finding closure rate
Training completion rates
Vendor compliance scores

Monthly Review Items

New system deployments
Regulatory updates
Incident trends
Audit findings
Policy exceptions
Vendor performance

Next Steps

Immediate Actions

Inventory all AI systems in use
Classify by risk level
Identify documentation gaps
Schedule initial assessments

30-Day Plan

Complete high-risk system reviews
Establish governance structure
Draft incident response procedures
Begin vendor assessments

90-Day Roadmap

Full compliance baseline
Training program launch
Audit schedule established
Metrics dashboard operational

Additional Resources

This guide provides general information and should not be construed as legal advice. Consult qualified legal counsel for specific situations.

Legal & Compliance Guide for AI Implementation