When you use cloud-based AI tools (Microsoft Copilot, Google Gemini, ChatGPT, Claude), your business data (customer info, financials, strategic plans, employee communications) is processed on servers controlled by those companies. Their terms of service determine what they can do with it. Most small business owners never read those terms.
If you're on a free or basic plan, assume your data is being used for model training unless terms explicitly say otherwise.
You probably can't. What you can do is make intentional choices about what data flows through which systems, diversify your vendors, advocate for transparency, and explore local AI for your most sensitive workflows.
Shadow AI is when employees use unauthorized AI tools for work tasks. It's the fastest-growing data security risk for small businesses. The solution isn't prohibition. It's education. Train your team on approved tools, data limits, and responsible use.
The tools you use are global. Data centers may be in Virginia, Ireland, or Singapore. If you serve EU residents, GDPR applies. When U.S. AI policy is unpredictable, it creates market uncertainty that affects pricing and availability for every business.
- Audit every AI tool your team uses, including unofficial ones. High
- Check TOS for each tool's data usage and training policies. High
- Write a 1-2 page AI use policy for your team. High
- Never enter customer PII into any AI tool without review. High
- Diversify AI vendors. Don't depend on one provider. Medium
- Make ethical AI a competitive differentiator. Strategic
Next Steps
Protecting your business is step one. Here's what comes next.