Why Every Business Needs an AI Policy

ByEmily Dolloff

Are employees at your company surreptitiously using artificial intelligence tools like ChatGPT, Claude, Copilot, and Gemini for everyday business tasks? It’s likely. An October 2024 Software AG study found that half of all employees use “shadow AI” tools to enhance their productivity, and most would continue using them even if explicitly banned by their employer.

Increased productivity is a good thing, but unsanctioned and unregulated AI use poses risks. A February 2025 TELUS Digital survey found that 57% of enterprise employees admit to entering high-risk information into publicly available chatbots. This includes personal data about employees or customers, product or project details, and confidential financial information like revenues, profit margins, budgets, and forecasts.

A clear AI policy will help a business minimize the risks of using AI tools. These risks include leaks of confidential information, compliance failures, accidental copyright violations, and reputational damage. As AI becomes a routine part of knowledge work, every business—even small firms—must establish an AI policy to maximize the benefits of using AI while safeguarding the company, its employees, and its clients.

Risks Addressed by a Formal AI Policy

Unauthorized AI use can create several types of problems:

  • Data security: Employees routinely paste sensitive data—including customer information, financial records, and unreleased products—into public AI tools, thereby losing control over how that data is used. That can make security audits nearly impossible and drive IT staff crazy. Notably, the free versions of ChatGPT (by default, it can be turned off) and Google’s Gemini can incorporate user data into their training models, making it possible that the information could be included in a discussion with someone else.
  • Legal and compliance risks: Sharing protected information with non-compliant AI systems could result in penalties during regulatory audits, even if no actual data breach or harm occurs. For instance, using such systems to summarize patient records could violate HIPAA, while using them to analyze customer data could run afoul of the California Consumer Privacy Act (CCPA).
  • Unintentional discrimination: Without clear guidelines, the use of AI can lead to unintentional discrimination in hiring, customer service, and decision-making. This may violate ethical standards and expose the company to legal liability.
  • Employee confusion: The lack of a coherent AI policy leads to inconsistent practices and uncertainty about acceptable tools and proper procedures, resulting in reduced productivity and increased anxiety about AI use.

Essential Elements of an AI Policy

The specifics of an AI policy vary by the type and size of company, but at minimum, most AI policies should include the following:

  • Permitted AI uses and tools: Clear guidelines on the types of tasks employees may undertake with AI assistance and a list of approved AI platforms for business activities
  • Data privacy and legal compliance: Rules for safeguarding confidential, personal, and proprietary information when using AI, coupled with rules that ensure adherence to relevant industry-specific regulations and privacy laws
  • Human oversight and transparency: Requirements that employees thoroughly review AI-generated content before use and disclose AI involvement when appropriate in client-facing or public materials
  • Risk reporting and incident response: Clear instructions for reporting AI-related errors, security incidents, or potential misuses
  • Ownership and intellectual property clarifications: Statements affirming that work products created with AI assistance belong to the company. These statements should also address any intellectual property considerations.

Building Your AI Policy

If your company doesn’t already have an established process for generating policies, AI tools can themselves provide a starting point when used thoughtfully. Here’s an approach:

  1. Prompt an AI tool like ChatGPT or Claude to generate a basic AI policy template. Be explicit about your company’s size, industry, and other relevant details, and be sure to specify that it must cover the elements listed above—you can paste them in. Iterate as necessary until the template has all the required sections.
  2. Review the generated template carefully, removing generic content and noting areas that need company-specific details.
  3. Ask for feedback on the draft from key stakeholders, including:
    • Leadership to align with company goals and values
    • IT team to verify technical feasibility and security measures
    • Legal counsel to ensure compliance with relevant regulations
    • Department heads to confirm that it will be practical to implement the policy
  4. Incorporate the feedback to create a policy that reflects your company’s specific needs while maintaining necessary protections.

Remember: An AI-generated template is for starting the conversation. The final policy must be tailored to your organization’s specific needs and thoroughly vetted by relevant stakeholders.

The rise of AI tools in the workplace isn’t just a trend—it’s a fundamental shift in how work gets done. Whether your employees are already using AI tools without oversight or are hesitant to use them due to uncertainty, now is the time to establish a formal AI policy. Start with the template approach outlined above, engage your stakeholders, and develop guidelines that work for your organization. A well-crafted AI policy will help your business harness the benefits of AI while minimizing its risks.

(Featured image by iStock.com/girafchik123)

Social Media: Shadow AI is commonplace in workplaces, with half of employees using unauthorized AI tools and many sharing sensitive data. Learn why your business needs a formal AI policy to harness the benefits of AI while safeguarding against its significant risks.

Similar Posts

  • Keep Your IT Budget Working During a Slowdown

    When business slows down, it’s tempting to reduce IT spending. But that approach often backfires, creating bigger problems—and larger bills—down the road. Beyond…

  • Sonos and Apple Music

    A little over a week ago things became official: Apple Music is now available to those who use “**Sonos.**”:http://www.smalldog.com/category/?mmfg%5B0%5D=Sonos For some of us this wasn’t a huge announcement. I have been using the beta version now for several months and have been enjoying my Apple Music playlists as well as my own personal play lists on my iPhone. I have been a huge fan of Sonos for about two years and not being able to listen to Apple Music was my one complaint about the system, but not anymore!

    Apple Music isn’t the only great thing about Sonos either, did you know that you can also control your Sonos system from your computer? I admit, I didn’t realize this at first. With a huge focus on how easy the system is to set up and control from your iPad or iPhone, this is one feature that’s often overlooked. With a simple “App download”:http://www.sonos.com/controller-app on your computer, you can open up your entire (in most cases) music library for listening through your Sonos system. Another great feature of the Sonos App is the ability to set a sleep timer. If your someone who enjoys falling asleep to music, but prefers it doesn’t stay on all night this is a huge feature even if it is a bit hidden. The more info icon within the Sonos App hides a lot of features, including the sleep timer.

  • The Little Guy(s)

    You know I am a rabid Boston Celtics fan, and I have been since I was a child listening to games on my transistor radio, searching for the gravely voice of Johnny Most. These days our All-Star and team leader is Isiah Thomas who NBA hall of famer, Tommy Heinsohn, always refers to as the “little guy”. We have been thinking of changing our dog, Max’s name to the little guy as a result.

    It was little iPhone and little iPad Pro day at the Apple event. Apple introduced the 4-inch iPhone SE and the iPad Pro 9.7-inch tablet. In other hardware announcements, there were new watch bands for the Apple Watch and a new Lightning to USB 3 camera adapter. The original iPad Air is now discontinued and the iPad Air 2 with a more limited selection becomes the entry-level 9.7-inch iPad.

    I have gotten used to the size of my iPhone 6 but there are many people that want a smaller iPhone. Having a big iPhone 6 or 6+ sticking out of your back pocket is an invitation to theft and they do get a big bulky in the front pocket of your jeans. The iPhone SE uses the iPhone 5 form factor, with a 4-inch screen and aluminum case. The iPhone SE is not crimping on power though, as it meets almost all of the specifications of the iPhone 6s. It fails to match up to the current iPhone lineup only in the lack of the 3D Touch technology, the Taptic Engine that provides feedback you can feel, and slower wireless networking. It’s either $399 or $499, with 16 GB or 64 GB of storage, and comes in the same four colors, Silver, Space Gray, Gold and Rose Gold. We have found that most cases for the iPhone 5 should work with the iPhone SE. These are shipping on March 31.

    p{text-align: center;}. !http://blog.smalldog.com/images/4692.png!

    The 12.9-inch iPad Pro, introduced last year with the Apple Pencil and Smart Keyboard, has enjoyed some moderate acceptance as a productivity device. I can see how for some, it might be their only device. And for artists, architects and others the iPad Pro is a digital drawing board like no other. But it is 12.9 inches and that is just a bit large for some. Apple introduced the 9.7-inch iPad Pro to meet this need, which meets or exceeds many of the larger model’s specs.

    For instance, the smaller model’s screen can display more colors and adjusts its white balance to match the ambient light in the room. Its cameras are notably better — the rear camera is 12 megapixels instead of 8 and has a True Tone flash, while the front camera is 5 megapixels instead of 1.2 and can use the screen as a flash. Plus, the new iPad Pro can record 4K video instead of just 1080p. I assume we will see these upgrades to the 12.9 inch iPad Pro in the future but the smaller version is a powerhouse.

    The 9.7-inch iPad Pro’s A9X chip is somewhat slower, it has half the RAM, and its Lightning port transfers data at only USB 2 speeds. But if the size is right for you, prices start at $599 for 32 GB of storage and go up to $899 for 256 GB. It will be shipping on March 31 in four colors: silver, gold, space gray, and rose gold. Cases and accessories designed to fit the iPad Air 2 should work with the 9.7-inch iPad Pro. We have our orders in with Apple and should have stock by the launch date. I think this new iPad Pro is going to be the iPad of choice for a lot of people.

    p{text-align: center;}. !http://blog.smalldog.com/images/4689.png!

    Apple also introduced the $39 Lightning to USB3 camera adapter. It is much more than a camera adapter though and opens the Lightning port to a lot of USB devices. With the Lightning to USB 3 Camera Adapter, it’s easy to transfer photos and videos from your high-resolution digital camera to your iPad Pro.
    If you connect with a USB Power Adapter, you can connect USB peripherals like hubs, ethernet adapters, audio/MIDI interfaces, and card readers for CompactFlash, SD, microSD, and more. This is a new and important step by Apple in making the Lightning port much more versatile.