I’ve sat in boardrooms where executives knew they were in active breach of regulations that could literally shut their business down. They deliberately chose to stay at risk because they didn’t have the funding.
That may sound like negligence. But it’s more calculated than what most companies do, which is to pretend those regulations don’t exist.
AI may be forcing a reckoning. The days of burying one’s head in the sand are closing. Buyers in regulated industries are worried about how to confront the reality of Artificial Intelligence. They’re all curious or feel pressure to adopt AI, but they run into two hard questions:
- How do we even adopt AI when we mostly don’t know what we actually need it to do yet?
- How do we future-proof our processes against regulations we know are on the horizon?
Despite how the headlines make it sound, AI isn’t rewriting the rules of cybersecurity. If anything, it’s amplifying your existing data risks and forcing you to take the fundamentals of data safety more seriously than ever.
Here is what every regulatory buyer must know about AI.
Why regulated companies must start with deny by default
In unregulated industries, founders love to brag about “moving fast and breaking things.” But in highly regulated industries, if you break things, you go to jail or shut down.
Your starting posture can’t be permission. It has to be deny by default. You restrict the unmanaged consumer tools on day one and make people ask. You accept that you will lag behind the consumer innovation curve. And you lag on purpose. You only phase AI in when you have a deliberate, bulletproof strategy to protect your data. One caveat. A ban you can’t enforce isn’t a control, it’s a blind spot you built on purpose. If you’re going to restrict the tools, stand up the sanctioned alternative fast. Otherwise your people will solve the problem themselves, on their own accounts, with your data.
Technology is moving much faster than federal oversight. Official regulation is currently trickling in primarily at the state level and from the EU, which is well ahead of the US. This regulatory lag forces buyers to build their own guardrails long before official national policies take effect.
The challenge for now is knowing exactly where your data goes, who accesses it, and how it is used.
Are the doors locked?
The best thing regulatory buyers can do is gain absolute visibility into data governance and basic security hygiene.
It’s easy to be afraid that AI will introduce a flurry of groundbreaking, futuristic security exploits.
You’d be amazed by how many executives want to discuss futuristic, highly advanced AI security exploits. Yet their basic security hygiene is a disaster. It’s like worrying about an alien invasion while leaving your front door wide open.
To protect your organization, you start simple, at the ground floor: Are my doors and windows locked?
- Stop handing out the house keys: Giving default admin access to multiple employees severely compromises your security. Lock down privileged access to the absolute minimum.
- Build internal walls: Segmentation is your best friend. Keep environments isolated so that if someone does breach a window, they never wander freely through the house.
- Know where you store the valuables: You must draw a hard line between local data in your infrastructure, what goes into your private cloud, and what is exposed on the public web. You should always have a clear answer when asked: Where does my data live?
Your greatest AI risk is human
The greatest vulnerability today is employees throwing sensitive files into their favorite LLM, and you having zero idea where that data is actually going.
We are seeing a massive “shadow IT” sprawl. Employees are installing unvetted AI browser extensions, rogue note-takers, and productivity apps simply because they are interesting. Then, they throw highly sensitive corporate files and meeting transcripts into standard, free LLMs. Cyberhaven’s telemetry puts roughly a third of the corporate data going into AI tools in the sensitive category.
Unless you’ve invested in active detection that can spot these data leaks, your employees are unknowingly passing your proprietary data to outside companies, including AI tools that are training on your IP.
Organizations must invest heavily in AI Security Posture Management (AI-SPM). This requires a fundamental shift from merely blocking tools to actively detecting data loss. It also means managing unchecked tool adoption, which includes tracking unvetted note-takers, rogue browser extensions, and unauthorized applications that employees install simply because they look interesting. Start with visibility. Most organizations can’t say where AI is being used in the first place, and you can’t control or prove what you can’t see.
Keep a human driving
Sometimes the best security question to ask is: What are the most mature companies doing?
You immediately know they’re not handing over the keys to autonomous AI. If they’re using AI, they’re deploying it in such a way that two things are true at once:
- They deploy AI internally to elevate their workforce
- Without exposing client environments
At RedZone, for example, when it comes to penetration testing, we don’t let AI autonomously run rogue to test customer environments. We use human-led teams and use AI only to validate what they’re seeing. Human-verified, technology-assisted.
The goal of AI in a regulated workforce is elevating the work of every team member.
- Eliminate manual labor: AI excels at processing heavy data loads, like parsing logs, which traditionally required tedious manual scripting.
- Focus on strategy: By removing this manual heavy lifting, senior engineers are freed up to focus on higher-tier strategic tasks.
- Avoid the slop: It’s garbage in, garbage out. If you aren’t careful, you end up with “AI slop delivery.” But when used right, AI is great at eliminating the tedious data crunching that would usually crush Excel for days.
How to budget when you can’t do everything
If you want to drive revenue and protect your assets, you have to stop managing by assumption. For executives managing technology budgets, the path forward requires strict alignment and prioritization.
You don’t need an infinite security budget to stay above board:
- Take the 80/20 reality check: Focus your budget on capturing the 80% of immediate governance risks rather than chasing the 20% edge cases.
- Avoid budget dilution: Do not spread your budget thin across niche edge cases before securing your baseline layer.
- Stop piecemealing security: A fractional approach of piecemealing audit reports together leaves you at risk. You need a partner who understands your business and manages everything from soup to nuts.
- Consolidate to experts: Audit reports are only as good as the data fed into them. Instead, partner with unified security organizations that manage your environment end-to-end.
- Vendor alignment: Choose security partners that treat risk seriously. Do not engage with vendors who race to the bottom on price or look to bypass compliance for quick wins.
AI readiness for regulatory buyers is about building a strong governance envelope that allows you to innovate safely without risking the entire business.
Most leaders say “we need to do more AI,” but they don’t know what they actually need. The real opportunity today is quite boring and right under your nose: Using AI to gain control over governance and risk.