AI, Governance and the Three Lines: Why the Future Depends on Who Chooses to Evolve
Artificial intelligence will reshape Governance, Risk and Control (GRC) far more profoundly than most corporate leaders yet appreciate. But the impact will not be evenly distributed. We are already seeing the early formation of a two-class system — those who invest, adapt and create, and those who hesitate, delay and ultimately fall behind.
Think of it this way: Tier 1 companies upgrade to the new world; Tier 2 companies cling to ‘Windows 7’ — functional, familiar, and increasingly obsolete. This divide will define the next decade of corporate governance.
In this article I explore what AI means for GRC, the Three Lines Model, and the internal audit profession. I also offer predictions that boards, executives and auditors will need to internalise quickly if they want to lead rather than lag.
A Two-Class Response to AI: Tier 1 vs. Tier 2
AI does not create innovation; it amplifies it. Organisations already predisposed to curiosity, creativity and investment will use AI to accelerate exponentially. These Tier 1 firms will redesign their GRC architecture around insight generation, behavioural foresight and rapid decision-making.
Meanwhile, Tier 2 companies will continue spending enormous amounts of time and money establishing basic facts — reconstructing events, reconciling data sets, validating transactions. Tasks that Tier 1 organisations will complete in seconds.
The result? Tier 2 becomes “expensive business as usual” while Tier 1 races ahead, using AI to imagine, simulate and evaluate future scenarios before others have even understood the present.
The Three Lines Model Will Survive — But It Will Evolve
AI will not remove the need for the Three Lines; if anything, it will make the roles sharper and more necessary. But the interaction with AI — the “black box” — will be different in organisations depending on their tier.
A quick reminder of the purpose of the Three Lines:
First Line: To run the business, make decisions and own the risks.
Second Line: To provide oversight, challenge and subject-matter expertise.
Third Line: To offer independent assurance and forward-looking advice.
This framework is robust. AI will not change these fundamental purposes — but it will change how each line performs them.
Where the Second Line Thrives: When Conflict of Interest Demands It
The Second Line’s future relevance will hinge on one factor: inherent conflict of interest.
If the First Line is incentivised in ways that clash with long-term corporate resilience, the organisation needs a strong, technically capable Second Line.
Example:
A retail bank where commercial incentives reward aggressive sales volumes. The First Line cannot self-regulate this tension because revenue pressure sits directly against conduct, compliance and customer fairness. AI may accelerate detection, but the governance architecture still requires an independent challenge function.
Where no such structural conflict exists, expect many organisations to reduce or redesign the Second Line entirely.
Tier 1: All Three Lines Will Use AI — but Differently
In Tier 1 organisations, every line will reference the output of an AI engine — the black box that ingests vast data streams and produces real-time patterns, risks and signals. But their use cases will be distinct:
First Line
Uses AI to make faster operational decisions, understand behavioural patterns, test strategies and evaluate real-time trade-offs.
Second Line
Uses AI to detect systemic bias, misconduct signals and emerging risk patterns that human teams miss.
Third Line
Uses AI to challenge assumptions, build alternative futures, simulate risk scenarios and quantify consequences of poor governance and weak culture.
The Biggest Shift: Less Time Establishing Facts, More Time Projecting Consequences
AI collapses fact-finding from weeks to minutes.
Tier 1:
The Three Lines will shift their energy almost entirely into:
interpretation
consequence analysis
scenario exploration
strategic warning
behavioural foresight
Tier 2:
Will continue burning capacity on reconstruction, verification, sampling and historical diagnostics — activities AI commoditises. This is where the gap will widen most noticeably.
What This Means for GRC and Internal Audit
1. Less forensic, more consequential
2. Less detail-orientation, more critical orientation
3. More creative risk thinking
4. More systems thinking
5. More people skills
6. Fewer people overall
7. Fewer junior roles
8. Stronger behavioural competence
AI Bubble? Yes. AI Impact? Permanent.
There will be an AI bust — markets always overshoot. But the core capability now available to organisations will not disappear. This is not crypto, not VR goggles, not a passing management fad. Companies that hesitate now will spend years trying to catch up, often unsuccessfully.
AI’s contribution to Governance, Risk and Control is already irreversible.
Tier 1 companies have begun the race.
Tier 2 companies still think the race hasn’t started.
Final Thought: The Coming Governance Divide
The next decade will not be defined by technology itself but by the quality of leadership choices around that technology. AI will not make GRC professionals redundant — it will make low-maturity governance redundant.
Those who embrace creativity, systems thinking and behavioural foresight will flourish.
Those who cling to forensic comfort and historical reconstruction will fall behind.
The divide is forming.
Which side your organisation lands on is a decision you must make now.