Generative AI is now part of everyday workflows across organizations, and your employees are almost certainly using it. Whether it’s a marketing specialist using ChatGPT to brainstorm ideas, a developer utilizing it for coding, or an administrator asking an AI tool to summarize a 40-page report, employees are using AI in their job.

As a business leader, it’s easy to look at this wave of productivity and think that nothing can go wrong. Especially with tasks that used to take four hours now take forty minutes. The reality is that adopting AI without clear, documented guardrails is one of the fastest growing compliance and legal liabilities for businesses today.

When employees use public AI tools without guidance, they inadvertently expose their company to three critical risks:

• Potential corporate data leaks
• Exposing Intellectual Property (IP)
• AI hallucination risks

Corporate Data Leaks

A risk that many companies are not considering is how entering data in AI can lead to corporate data leaks. When an employee pastes information into a standard/free AI tool, that data doesn’t stay private. Most public models use input data to train future versions of their software. If an employee pastes sensitive data, for example, client financial statements, proprietary performance review data, or internal SOPs, that data is absorbed. Effectively, your company’s private information could be surfaced by a competitor asking the right questions.

Exposing Intellectual Property

Another risk is losing the rights to highly protected IP because of AI. Purely AI generated work usually cannot be copyrighted. If your team is relying on AI to generate proprietary software code, brand logos, or core product descriptions, your business may not legally own that material. Worse, public AI tools are trained on existing copyright work, meaning your team could unknowingly introduce copyright infringement into your client’s deliverables.

AI Hallucinations

Lastly, AI hallucinations and using extrapolated or inaccurate information is another significant risk. AI models are designed to predict the next logical word, not verify absolute truth. They frequently “hallucinate,” which is a term for inventing fake facts, metrics, and legal citations with total confidence. If a team member relies on an unverified AI summary for a critical client proposal or a vendor contract, your company bears 100% of the legal and financial responsibility for those inaccuracies.

Faced with these risks, forward-thinking organizations establish “traffic laws” for their employee’s AI usage. A modern, robust AI usage policy should focus on three main items:

• An approved tools list
• A “human in the loop” mandate
• Data classification boundaries

Approved Tools List

It is important to clearly separate public tools from enterprise-grade tools. If your company uses AI, it is a good idea to invest in corporate accounts that offer strict data privacy clauses, ensuring your inputs are never used for model training.

“Human in the loop” Mandate

Employers should establish a zero-tolerance policy for unchecked AI output. No work created by AI should be allowed to be published or used without being audited and verified by a human expert.

Data Classification Boundaries

Employers may want to dictate exactly what can and specifically what cannot be typed into a prompt. Customer names, medical information, proprietary source code, and trade secrets should be explicitly blacklisted from public models.

The AI landscape is moving incredibly fast. Don’t wait for a data breach or an IP lawsuit to dictate your company’s rules. Drafting a well thought out AI Usage policy will help protect your business, empower your team, and establish your workplace guidelines.

This information does not constitute legal advice.