Legal risks of AI: Why your business needs a workplace policy?

Zawya

4 days ago

As the use of artificial intelligence (AI) tools becomes more prevalent in the workplace, businesses face new legal, ethical, and operational challenges. AI brings exciting opportunities to innovate, work more efficiently, and save costs, but allowing employees to use these tools without clear rules and guidelines can expose a company to risks, including data leaks, damage to reputation, or regulatory violations.
For these reasons, having an internal AI policy is no longer merely a value-add — it has become essential for any business seeking to remain competitive and secure amid the current technological revolution.
Potential legal risks
One of the most compelling reasons to implement an AI policy is to reduce legal exposure. In South Africa, the Protection of Personal Information Act 4 of 2013 (PoPIA) places strict obligations on organisations to handle personal information lawfully and securely.
When employees use generative AI tools, especially cloud-based platforms such as ChatGPT or Midjourney, there is a risk that they may inadvertently upload confidential, personal, or proprietary data into environments where control is lost.
The hidden danger in AI inputs
This risk is heightened by the way generative AI models function. Generative AI models depend on data inputs to generate results. Employees might unknowingly not only expose personal information protected by PoPIA but also release sensitive internal reports, client details, or proprietary content by entering them into these platforms.
This can lead to unintended data exposure, as confidential information might be stored, reused, or incorporated into public AI training datasets.
What a good AI policy should include
To mitigate these risks, having an internal AI policy helps protect information by forbidding the upload of confidential data to public AI platforms, requiring proper testing of any third-party AI tools before use, and making sure AI-generated outputs are reviewed carefully to avoid leaking protected information.
It is also important to remember that AI is not neutral; it can reflect and even amplify human biases. If AI is used in decision-making, like screening candidates or creating marketing materials, it could unintentionally introduce unfairness or exclusion.
A good AI policy should encourage ethical use, focusing on fairness, transparency, and accountability. Incorporating these ethical standards into company governance not only reduces legal exposure but also fosters trust among clients, customers, and employees.
An AI policy is not intended to restrict innovation but to support it responsibly. When employees understand which AI tools are approved and how to use them safely, they can experiment and innovate without risking legal or reputational harm.
By establishing clear guidelines instead of harsh restrictions, the policy empowers staff to automate routine tasks, explore new customer solutions, and enhance productivity and quality while effectively managing risks.
South Africa's steps toward AI regulation
Around the world, AI regulations are developing rapidly. The European Union's AI Act, for instance, establishes strict rules for high-risk AI systems.
While South Africa does not yet have specific AI legislation, regulators and industry groups are closely monitoring responsible AI usage, especially in sensitive sectors like finance, healthcare, and government.
The Department of Communications and Digital Technologies (DCDT) is leading the way on AI regulation in South Africa. After launching their National AI Plan, the DCDT has advanced further by publishing the South African National AI Policy Framework. This demonstrates their ongoing commitment to establishing a comprehensive national AI policy.
Implementing an AI policy is more than a forward-thinking move — it's a critical defence against the real and rising risks of AI misuse, from data leaks and compliance breaches to reputational harm. A clear policy empowers your team to innovate responsibly while protecting your business from costly mistakes.
It also signals to international clients and partners that your business meets global standards for ethics and compliance — an increasingly important trust marker in today's connected economy.
AI may be artificial, but your risks are real.
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