Editor’s Note:
This article is the final in a comprehensive series on Data Governance and AI Data Governance for Law Firms. The series is designed to help legal professionals understand and implement effective governance frameworks. Each article builds on foundational concepts to address specific challenges, from assessing governance needs to managing risks associated with AI tools. The series aims to provide practical, actionable guidance tailored to the legal sector's unique demands. It empowers law firms to safeguard client data, ensure regulatory compliance, and enhance operational efficiency. Stay tuned for upcoming articles as we delve deeper into this critical topic.

Executive Summary

As law firms rapidly adopt Generative AI (GenAI) tools to enhance legal services and operational efficiency, establishing a robust data governance framework has become not just beneficial, but essential. This article outlines why law firms must implement comprehensive data governance before deploying GenAI tools and provides a practical roadmap for doing so.

Key takeaways:

• Law firms face unique data governance challenges due to attorney-client privilege, ethical obligations, and the sensitive nature of legal data

• Proper data governance enables safe and effective use of GenAI while protecting client confidentiality and maintaining compliance

• Implementation requires six critical steps: needs assessment, data inventory audit, data flow mapping, controls evaluation, risk assessment, and ongoing training

• Success depends on early stakeholder engagement, clear classification of data types (especially privileged communications), and regular monitoring

• Benefits include enhanced security, improved operational efficiency, reduced liability risk, and the ability to safely leverage emerging AI technologies

  
  

  The framework presented here helps firms navigate the intersection of legal ethics, technology adoption, and data security. By following these guidelines, firms can confidently embrace AI innovation while upholding their professional obligations and protecting client interests.

I wholeheartedly believe that AI tools will become a lawyer’s best assistant. But with an in-depth understanding of GenAI implementation in law firms comes the realization that if your firm is going to use AI tools for anything other than an enhanced Google search, you need to have a strong data governance plan in place.

THE “WHY”

Confidentiality and Data Security: In the modern legal landscape, data is both a firm’s greatest asset and its most significant challenge. The greatest reluctance, and even fear, of law firms afraid to embrace GenAI tools is undoubtedly the worry of mishandling confidential and privileged information. This constant concern of law firms is amplified by the thought of sending confidential information hurtling out into the world of large language models, where an AI tool, ever hungry for data, might gulp up that confidential information and then spit it back out where and when it should not be shared. This is a valid concern and one that can be handled in large part by a solid data governance plan.

In addition to the stringent confidentiality and requirements to maintain privilege, there are several other reasons lawyers have reason to pause before jumping wholeheartedly into GenAI.

Accuracy and Quality Control: AI can make mistakes, hallucinate citations, or generate plausible-sounding but incorrect legal arguments. This creates potential liability risks if incorrect AI-generated content makes it into official documents.

Ethical Obligations: Lawyers have professional duties of competence and diligence. They need to understand both the capabilities and limitations of any AI tools they use to ensure they meet their ethical obligations to clients. This includes being transparent about AI use when appropriate.

Bias and Fairness: AI systems may perpetuate existing biases in legal data and precedents. Law firms must be mindful of potential discriminatory impacts and ensure AI use doesn't compromise equal access to justice.

Skills and Training: Effective AI implementation requires investment in training lawyers to use these tools appropriately. Firms need to develop clear policies about AI use and ensure staff understand best practices for reviewing and validating AI outputs.

Workflow Disruption: Integrating AI into existing legal workflows can be challenging. Firms need to carefully consider change management and how to maintain quality while incorporating new tools.

Best Use of GenAI: Further, to make the best use of GenAI with abilities such as agentics, high-quality data governance is required. In the context of Generative AI (GenAI), agentics refers to the design, development, and management of AI agents that work independently within a given set of guidelines to complete specific tasks or goals. These agents leverage generative AI models, such as Claude, Spellbook, Gemini, or ChatGPT, to simulate human-like reasoning, decision-making, and creative problem-solving in dynamic environments.

The remainder of this article explores why data governance isn’t just about managing data—it’s about empowering AI, ensuring compliance, and driving operational efficiency. It is also a guide to setting up your firm’s data governance plan. By establishing clear policies and practices for data management, law firms can confidently embrace AI’s potential while safeguarding their clients, their reputation, and their future.

THE “HOW”

Successfully implementing a data governance policy requires more than just written procedures. It demands a cultural shift where data protection becomes part of the firm's DNA. This involves regular training, clear communication of expectations, and visible leadership commitment to data governance principles. When properly implemented, these policies become enabling rather than restricting, supporting rather than hindering the practice of law.

Let's break down this critical assessment process into manageable, actionable steps.

Step 1: Assess Your Firm’s Data Governance Needs

When Alice, lost in Wonderland, asks the Cheshire Cat which way she ought to go, the cat’s insightful response is, “That depends a good deal on where you want to get to.” (Alice’s Adventures in Wonderland, Lewis Carroll, 1865) Likewise, with Data Governance, you must first decide where you want to arrive before you start on the journey. You do this by clearly answering the following questions:

• What types of data does your firm handle?

• Where do you receive it from?

• Where does it need to go?

• How is the data maintained?

• How is data monitored and disposed of?

Firms must first understand their current data landscape to build an effective governance framework. Firms can make the mistake of implementing policies without first conducting a thorough assessment, leading to gaps in coverage and ineffective controls. Unlike most businesses, law firms must consider not just data sensitivity but also legal privilege in their governance framework. The attorney-client privilege and work product doctrine create distinct categories of protected information that require specialized handling and additional safeguards. A misstep in managing privileged information can have severe consequences, potentially waiving privilege and compromising client interests. Therefore, any data governance assessment must begin with a clear understanding of privilege designations and their implications for data handling.

Get Stakeholders Involved Early

At this data inventory stage, get the involvement of the key stakeholders at your firm. The longevity and success of your Data Governance Plan will be heavily impacted by the stakeholders. The necessity of identifying and getting buy-in from the stakeholders should not be underestimated. To identify the stakeholders, consider the firm’s hierarchy. Who makes decisions? Who helps to set the firm’s culture? There might be several layers of decision-makers and “influencers” to include. The larger the law firm, the more levels you need to consider. Once you’ve identified the stakeholders, get their buy-in by highlighting all of the benefits of a robust data governance plan--to the firm and to them personally.

Step 2: The Data Inventory Audit

A comprehensive data inventory audit serves as the foundation for all subsequent governance decisions. This isn't merely a cataloging exercise—it's a strategic analysis of your firm's entire data ecosystem, with privilege considerations at its core. The data audit will reveal where gaps exist and where improvements are needed.

Start your data inventory by identifying all classifications that your firm deals with.

Data Categories and Classifications

A law firm’s data can be broadly classified into privileged, non-privileged, public, and administrative categories. Within these categories, further refinements allow for more tailored protections:

1. Privileged Communications and Work Product*

   • Attorney-client communications

   • Internal legal strategy documents

   • Work product and case analysis

   • Internal memos regarding legal advice

   • Drafts of legal documents

   • Attorney notes and mental impressions

2. Confidential Client Information (Non-Privileged)

   • Client business records

   • Background documents

   • Due diligence materials

   • Client personal information

   • Third-party confidential information

   • Client financial records

3. Matter-Related Public Information

   • Filed court documents

   • Public records

   • Published opinions

   • Press releases

   • Industry research

4. Administrative Internal Business Operations Data

   • Time and billing records

   • HR personnel files

   • Marketing materials

   • Administrative records

   • Vendor contracts

* The above are suggestions and must be adapted to the needs of your firm.

By classifying your data this way, you clearly identify the most sensitive information--privileged content--which, therefore, needs to be protected with the strongest safeguards. Less critical data receives appropriate but proportionate controls.

Best Practices:

Look for the following as you are conducting your audit:

• Gaps in privilege management: e.g., documents not clearly marked as “privileged” or improperly stored alongside non-privileged records.

• Inconsistent application of access controls: e.g., sensitive client files accessible to unauthorized personnel.

• Outdated systems: e.g., data stored in legacy systems without encryption or access controls.

• Consider data in every possible location: e.g., uncategorized data in your email system, or separated by practice group. Modern law firms without a good grasp on data governance can have data silos--distinctly separate areas where data is stored, within the firm.

Step 3: Map Data Flows and Dependencies

Once you have completed your data inventory and have a solid grasp of all your data and where it is, you need to understand how the data flows through your firm. Create a clear map of how data moves within and outside your firm. Data mapping is critical for identifying weak points and mitigating risks. And it will help you understand your “Data Lineage” – where your data is, where it came from, and that it is going to the correct location.

By mapping your data flow, you gain visibility into how sensitive data is handled, stored, and shared, ensuring that workflows align with privilege and confidentiality obligations. Several of the tools mentioned above have integrated data mapping and workflow optimization capabilities.

Step 4: Evaluate Existing Controls

With a clear picture of your firm’s data landscape, the next step is to examine how data governance should look in your practice. This evaluation focuses on identifying gaps, inconsistencies, and opportunities for improvement in day-to-day operations. Once you have cataloged and mapped your data, assess the controls currently in place to protect it.

Key Considerations:

• Are access controls tailored to the sensitivity of the data? For example, are privileged documents restricted to select attorneys and their support staff if needed? Setting up role-based control (access to data based on the role of the user, or RBAC) is ideal for privileged and sensitive data. Some applications such as iManage offer built-in options for RBAC.

• Are encryption methods applied to sensitive data both at rest—stored in your firm’s control--and in transit?

• How robust are your backup and recovery systems, particularly for privileged materials?

• Are data retention policies consistently applied, and do they distinguish between privileged and non-privileged records?

Best Practices:

• Set controls to lock out attorneys who are no longer at the firm, especially in regard to privileged data.

• Only use tools that provide security for data at rest and in transit, also known as end-to-end encryption (E2EE).

• Set up privilege-aware data backup systems so that you have additional controls on even backup copies of privileged information.

Step 5: Determine Risks and Establish Key Policy Components

Once you understand your firm’s needs and your data, you must understand your firm’s risk landscape.

Assess Risk Levels

Data governance risks can be broadly placed into 3 categories:

Legal & Ethical:[1] These risks center around a failure to be aware of or comply with local, national, and international laws such as the GDPR, HIPPA or the CCPR, or failure to comply with ethical and professional responsibilities. These risks can also include litigation due to insufficient or outdated governance policies​​.

Operational: These risks include inevitable challenges from integrating new technologies into your firm. It could be incompatibility between systems, an overlap between two different systems, or even just downtime that comes with all but the top level of enterprise systems.

Although not as widely considered as part of operational risks, these risks also include efficiency gain and loss. AI that is not well- governed or fed bad data may actually negate the benefits promised or expected by implementing AI.

Reputational: Firms like the ones mentioned at the beginning of this article that suffer cybersecurity attacks and are ordered to or agree to pay settlement amounts also have the double-whammy of a loss of reputation. Loss of reputation brings a loss of clients, matters, and, therefore, revenue.

Every category has costs associated with it, both monetary and other. Whether it be fines associated with failing to comply with the governing laws and regulatory systems or the expenses of defending against or pursuing litigation, all will affect your bottom line. This cost is increased if your firm incurs a judgment against it. Some of these harms can take longer to manifest themselves. Reputational damage can be difficult to quantify and can be affected by numerous other factors.

Once you understand your data—what you have, where it is, where it’s going and who has access to it, you are ready to assemble the components that will make up your policy.

Key Elements of Your DATA GOVERNANCE POLICY

A strong governance policy includes clear guidelines on all of the following.

1. Governance Objectives:

Key objectives should include:

• Protecting client confidentiality.

• Ensuring compliance with data protection laws.

• Improving data organization and accessibility.

2. Data Classification:

Categorize information based on sensitivity, such as:

• Privileged client information

• Publicly available records

• Administrative data

  3. Access Controls:

  Define who can access specific data types and under what conditions, ideally subcategorizing to allow only those with a specific need to access each client file with RBAC.

  
  

4. Audit and Monitoring Schedule:

Set out procedures for monitoring the governance systems. Conduct drills to verify that your monitoring system works and that each person in the firm understands their role and specific responsibilities.

5. Training:

The best governance plan is meaningless if the people handling the data to be governed are either unaware of the process or fail to adhere to it. Set an initial training and plan for regular updates to that training.

6. Retention and Disposal:

Set retention schedules that balance regulatory compliance with data minimization.

7. Incident Response:

Outline steps for detecting, responding to, and reporting data breaches.

Step 6: Set up an Audit and Monitoring Schedule

Setting up auditing and monitoring systems is crucial to ensure that your data governance plan stays relevant and in place. Monitoring is the real-time oversight of your data governance plan. Auditing complements monitoring by providing a structured review of past activities, assessing compliance with legal and ethical standards, and identifying areas for improvement. Regular audits help law firms detect policy violations, inefficiencies, or security gaps in data handling practices.

Key types of audits include:

• Access Audits – Reviewing logs to verify that data access follows role-based permissions and that no unauthorized access occurred.

• Regulatory Compliance Audits – Ensuring adherence to laws like GDPR, CCPA, HIPAA, and ABA Model Rules regarding data protection and privacy.

• Third-Party & Vendor Audits – Evaluating how external vendors (e.g., cloud providers, e-discovery services) handle firm and client data to mitigate supply chain risks.

• Data Retention & Disposal Audits – Ensuring that expired or unnecessary data is securely deleted in compliance with data retention policies and client agreements.

Law firms should conduct regular internal audits (quarterly or biannually) and, when necessary, external audits by independent assessors to maintain credibility and compliance.

Best Practices for Monitoring & Auditing Data Governance Plan:

To maximize the effectiveness of data governance oversight, law firms should adopt the following best practices:

• Maintain Detailed Audit Logs – Securely store access logs, document modifications, and any data transfers to establish a traceable record for compliance and investigation.

• Schedule Regular Compliance Reviews – Keep data governance policies aligned with evolving regulations through routine assessments.

  
  

Step 3: Set Up Training

Data governance is no longer a static concern for law firms—it is an evolving necessity. As legal professionals handle vast amounts of sensitive client data, they must ensure compliance with regulatory frameworks, safeguard confidentiality, and adapt to emerging technologies. While initial training is essential, it is not enough. Ongoing training is critical to maintaining a secure and compliant legal practice. As a practical matter, keep in mind that people at your firm will start using a system once they are trained on it. Have every part of your data governance plan in place before your initial training.

Initial Training

Foundational data governance training should be provided to all employees when they join a law firm. This initial training must cover core principles, including data security, privacy, integrity, and compliance obligations. Attorneys, paralegals, and support staff should be well-versed in the regulatory frameworks that govern data handling, such as local, state bar, and state rules for lawyers and clients’ data, GDPR, CCPA, HIPAA, and ABA Model Rules. Additionally, they should understand the importance of data classification—knowing what information is confidential, privileged, or publicly available—and the proper procedures for safeguarding it.

Ongoing Training

The legal and technological landscape is constantly evolving, making ongoing training an absolute necessity. New threats such as phishing schemes, deepfake scams, and AI-driven cyberattacks pose risks that law firms cannot afford to ignore. To stay ahead, law firms should conduct regular training sessions that address key areas of risk. Cybersecurity awareness training should be refreshed regularly, equipping employees to recognize and respond to emerging threats. Training on data breach response and incident handling is equally vital, ensuring that staff members know how to detect, report, and mitigate potential breaches before they escalate.

Best Practices for Training:

• Train the entire firm on the basics of data governance.

• Have specialized instruction tailored to different roles dependent on their responsibilities. For example, IT and data security teams should receive advanced training on encryption protocols, access control, and incident response strategies. Meanwhile, administrative and support staff require practical training on safe document handling, recognizing cybersecurity threats, and following firm-wide governance policies.

• After initial training, plan regular training at least biannually (two times per year).

A well-structured, ongoing data governance training program is not just a best practice—it is a necessity for modern law firms. With regulatory requirements constantly evolving and cyber threats becoming more sophisticated, firms that fail to train their staff adequately put themselves at risk of ethical violations, financial penalties, and reputational damage.

Incident Response Procedure

Once you have a solid data governance plan, you will need to create an incident response procedure. This will be covered in detail in a subsequent article, and you can find additional information about creating high-quality incident response procedures in our Chief AI Officer training.

CONCLUSION

By following this structured approach—auditing data, evaluating current practices, identifying risks, and setting up a comprehensive incident response plan—law firms can build a foundation for effective governance that aligns with legal obligations, operational needs, and ethical responsibilities. This assessment ensures that your policies comply with privilege and confidentiality requirements and enhance operational efficiency and trust at your firm.

[1] Article 3 in this series addresses regulatory frameworks and risk mitigation.

© 2025 Amy Swaner. All Rights Reserved. May use with attribution and link to article.