AI is becoming part of everyday business operations, from automating tasks and analyzing data to supporting recruitment and customer interactions. But as adoption accelerates, are companies putting the right safeguards in place?

For private capital investors, responsible AI is emerging as another important area of portfolio governance. The OECD defines responsible AI as a way to develop and use AI in ways that are safe, fair and transparent, with appropriate safeguards and accountability for potential risks. Much like cybersecurity, data protection and sustainability, it's an area where investors can help companies manage risks while unlocking new opportunities.

Getting started doesn’t have to be complicated. In this article, we explain why responsible AI matters for investors, share five practical steps to support portfolio companies, and highlight free resources to help you get started.

Why responsible AI matters for investors

AI can improve efficiency, support innovation and create new opportunities for growth. But without appropriate oversight, it can also expose companies to risks related to data privacy, cybersecurity, bias, unreliable outputs and regulatory compliance, potentially affecting business performance and investment value.

According to Reframe Venture's Responsible AI: The VC Perspective paper, 73% of private capital investors surveyed believe stronger responsible AI practices lead to better financial performance, and 50% expect the topic to arise during their next fundraise. Yet only 27% feel they have sufficient expertise in the area.

This highlights an opportunity for investors to move beyond recognizing the importance of responsible AI and start helping portfolio companies put it into practice.

Five practical steps to strengthen responsible AI across your portfolio

Investors don't need to become AI experts or create entirely new reporting processes. 

Responsible AI can be incorporated into existing due diligence, portfolio engagement and value-creation activities.

1. Understand how AI is being used

Start by identifying where and how portfolio companies use AI. Are employees relying on generative AI tools such as ChatGPT or Claude to create content, analyze information or automate tasks? Is AI integrated into customer-facing products or important business decisions?

A few questions in existing ESG assessments or portfolio reviews can help establish a baseline, identify potential risks and determine where companies may need support.

2. Help companies establish a responsible AI policy

For smaller companies without dedicated compliance teams, developing AI policies from scratch can be challenging.

Investors can help by sharing a simple policy template covering:

• Acceptable use: Which AI tools employees can use and for what purposes.
• Data protection: How confidential and personal information should be handled.
• Human oversight: When AI outputs and decisions require human review.
• Accountability: Who is responsible for overseeing AI use and addressing issues.
• Employee training: Ensuring employees understand how to use AI tools responsibly, recognize their limitations and know when human review is needed.

Companies can then adapt the policy to their operations, sector and risk exposure.

3. Take a proportionate, risk-based approach

Not every AI application carries the same risks. Using AI to summarize internal documents is very different from using it to screen job applicants or support medical decisions.

Investors should encourage companies to assess the potential impact of their AI applications and introduce safeguards accordingly.

The AI Risk Management Framework, developed by the National Institute of Standards and Technology (NIST), offers a structured way for organizations to evaluate AI-related risks and decide how best to address them.

4. Make resources and expertise accessible

Investors can help companies move faster by making practical guidance available across their portfolios.

This could include sharing policy templates, organizing short training sessions, connecting companies with specialists or facilitating knowledge exchange between portfolio companies.

The OECD's Due Diligence Guidance for Responsible AI offers useful recommendations for developing policies, identifying risks and monitoring progress.

5. Integrate responsible AI into existing governance processes

Responsible AI shouldn't become another isolated reporting exercise.

Instead, investors can incorporate a few relevant questions into investment due diligence, portfolio monitoring and board discussions.

For example: Does the company have an AI policy? Who oversees AI-related risks? Have potentially high-risk applications been identified?

Over time, these insights can help investors identify common gaps, share relevant resources and support continuous improvement across their portfolios.

Useful resources to get started

Several reputable organizations already provide practical tools for investors and companies looking to strengthen AI governance:

• Reframe Venture and ImpactVC - Responsible AI Due Diligence Tool: Helps investors assess AI-related risks and opportunities during investment due diligence.
• World Economic Forum - Responsible AI Playbook for Investors: Explores how investors can integrate responsible AI into investment processes and portfolio engagement.
• OECD - Due Diligence Guidance for Responsible AI: Provides practical recommendations for managing AI risks throughout business operations.
• NIST - AI Risk Management Framework: Offers a structured approach to identifying and managing AI risks.

From AI adoption to responsible innovation

Responsible AI isn't about slowing innovation or adding unnecessary reporting requirements. It's about helping companies understand how they use AI, manage emerging risks and build stronger businesses.

Just as investors have supported portfolio companies in strengthening cybersecurity, data privacy and sustainability practices, they have an opportunity to do the same with AI governance.

At Kara, we believe that meaningful improvement starts with understanding where companies stand and helping them turn insights into action. By integrating responsible AI into existing portfolio engagement and governance processes, investors can support more resilient businesses and long-term value creation.

To help companies take practical steps, Kara's Resource Hub brings together useful tools, templates and guidance to support continuous improvement.

Want to strengthen governance and responsible business practices across your portfolio? Discover how Kara can help you turn portfolio data into actionable insights.

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