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Holding Redlich on AI and Directors' Duties: Navigating Cyber Risk and Responsible Governance
Holding Redlich examines how AI is reshaping directors' duties around cyber risk and governance in Australia.
Artificial intelligence is now presenting two distinct governance challenges for directors. Boards must respond to the rising cyber risks associated with increasingly sophisticated AI models, while also navigating questions around how directors and executives can use AI themselves in ways that are consistent with their duties.
In May 2026, the Australian Securities and Investments Commission (ASIC) issued an open letter to AFS licensees and market participants, warning that frontier AI models are accelerating the speed, scale and sophistication of cyber-attacks. ASIC set out clear expectations for stronger cyber resilience and urged directors and executives not to wait for perfect clarity before acting.
ASIC has already demonstrated its willingness to take enforcement action in this space, having secured a $2.5 million pecuniary penalty against FIIG Securities Limitedfor failing to have adequate cybersecurity measures in place.
Using AI in the Boardroom: The Bekier Decision
The Federal Court recently addressed the use of AI in the context of directors performing their duties in Australian Securities and Investments Commission v Bekier [2026] FCA 196. Justice Lee acknowledged the practical challenge of directors being required to review large volumes of board material and indicated that emerging technology may assist, provided its use is principled and transparent.
His Honour noted that directors cannot simply rely on an inability to cope with the volume of information provided to them, and that the principled and transparent use of emerging technology could assist with analysing and understanding that material. At the same time, he emphasised that directors must ensure the way they receive and analyse information occurs responsibly, including through the formal adoption of policies.
Key Considerations for Directors
Holding Redlich highlights several important considerations for directors who rely on AI to review board materials or support decision-making:
- Information provided directly by AI is unlikely to constitute the professional or expert advice contemplated under section 189 of the Corporations Act 2001.
- Directors should remain vigilantwhen relying on information provided by employees, advisers or experts who have themselves used AI in preparing that material.
- When delegating duties, directors should maintain awareness of the extent to which delegates are using AI to assist in performing those duties, as inappropriate use may affect the protections available under section 190(2) of the Act.
- AI-generated summaries or analysis may not be covered by legal professional privilege, and may form discoverable business records.
Next Steps
Holding Redlich recommends that directors ensure their companies have in place policies and guidance that address both the management of AI-related risks and the responsible use of AI, including at board level.
Source: Holding Redlich
