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AI in GRC: The EU Act Effect

AI in GRC: The EU Act Effect

The EU AI Act—a landmark regulation coming into force in August 2025—will fundamentally reshape how European firms manage third-party risk. For organizations leveraging AI in governance, risk, and compliance (GRC), understanding the law’s scope and requirements is crucial to avoid severe penalties and ensure business continuity.

The EU AI Act: A Game-Changer for Risk Management

The AI Act introduces a risk-based framework that classifies AI systems in tiers: unacceptable, high, limited, and minimal risk. High-risk applications, such as those used in critical infrastructure, finance, healthcare, and employment, face stringent obligations for transparency, oversight, and risk management. Crucially, the new rules apply not only to providers, but also to users—including firms integrating external AI systems or models from third parties.

Third-Party Risk: What Changes

Under the Act, European firms must:

  • Evaluate vendors’ AI risk classifications
  • Scrutinize AI models in their supply chain for compliance risks—especially if classified as high-risk
  • Update procurement and risk assessment questionnaires to include specific questions about vendors’ data governance, AI transparency measures, and regulatory compliance
  • Ensure robust audit trails, employee training (AI literacy), and supervisory structures for any AI systems—internal or third-party

Even organizations outside the EU are subject to the Act if they place AI systems on the European market.

Compliance Burden and Penalties

Non-compliance can result in fines of up to €35 million or 7% of global revenue, whichever is higher. The EU’s broad definition of high-risk AI means that vendors and technology providers face increased scrutiny, including requirements for transparency on training data, model documentation, bias and fairness assessments, and conformity procedures.

Key Steps for GRC Teams

To stay ahead, firms should:

  • Map all third-party AI systems and identify their risk levels.
  • Integrate AI-specific risk modules into GRC platforms or processes, ensuring ongoing risk monitoring, documentation, and compliance reporting.
  • Coordinate with vendors to confirm readiness—ensuring they meet new obligations for data handling, fairness, and human oversight.
  • Engage with standards bodies (such as NIST or ISO) and adapt their frameworks for European compliance.

Preparing for the Future

AI governance is no longer optional. European firms must act now to assess their third-party exposure, update risk assessments, and ensure all parties in their supply chain align with the new mandates. For GRC professionals, embracing automated compliance tools, ongoing vendor communication, and regular audits will be key to safe and ethical AI deployment.

As the regulatory landscape evolves, building a strong GRC foundation will make your organization both AI-ready and resilient for the future.

For more on navigating AI in GRC and preparing for the EU AI Act, RegAhead offers tailored expertise and solutions for the European market!