Artificial Intelligence tools such as ChatGPT, Microsoft Copilot and other Large Language Models (LLMs) are now widely used by small businesses to improve productivity, customer service and efficiency.
However, without the right controls in place, these tools can introduce serious data protection and security risks — particularly around data leakage, GDPR compliance and intellectual property loss.
In this post, we outline the key risks, your responsibilities as a business, and practical solutions to help small organisations use AI safely and securely.
Why AI LLMs Create New Data Security Risks
LLMs work by processing and analysing the information users provide. This creates several risks if not properly managed:
Common Risks for Small Businesses
- Staff pasting customer data, contracts or personal information into public AI tools
- Accidental disclosure of commercially sensitive information
- Loss of control over where data is stored or processed
- Lack of visibility over who is using AI tools and how
- Breach of UK GDPR and client confidentiality obligations
Unlike traditional software, many AI tools are:
- Cloud-based
- Hosted outside the UK/EU
- Continuously learning or improving models
This means poor usage can quickly become a compliance issue.
Your Responsibilities as a Business Owner
Even when using third-party AI tools, you remain responsible for protecting data.
Under UK GDPR and good cyber-security practice, businesses must:
- Ensure personal data is processed lawfully and securely
- Prevent unauthorised disclosure of client or employee data
- Implement appropriate technical and organisational controls
- Train staff on acceptable use of technology
Using AI “informally” or without guidance is no longer acceptable.
Key Requirements for Secure AI Use
To reduce risk, small businesses should put the following foundations in place:
1. An AI Acceptable Use Policy
Every business using AI should define:
- Which AI tools are approved
- What data must never be entered (e.g. personal data, financial data, passwords)
- How AI outputs can be used and reviewed
- Disciplinary consequences for misuse
This doesn’t need to be complex — but it must be clear.
2. Data Classification and Awareness
Staff need to understand:
- What counts as personal data
- What is commercially sensitive
- What is safe vs unsafe to share with AI tools
Simple classifications such as:
- Public
- Internal
- Confidential
- Highly Confidential
…can dramatically reduce accidental data loss.
3. Choosing the Right AI Tools
Not all AI tools are equal.
Public AI tools (e.g. free web-based LLMs):
- Often store prompts
- May use data for training
- Offer limited contractual guarantees
Business-grade AI tools (e.g. Microsoft Copilot):
- Do not train models on your data
- Integrate with existing security controls
- Support data residency and compliance
Choosing enterprise-grade tools significantly lowers risk.
4. Access Control and Identity Management
AI tools should be:
- Linked to company accounts, not personal ones
- Protected by MFA
- Removed immediately when staff leave
Centralised identity management ensures visibility and accountability.
5. Monitoring and Technical Controls
Modern IT security can help prevent data loss even when mistakes happen.
Key controls include:
- Data Loss Prevention (DLP) policies
- Conditional access rules
- Endpoint security and device compliance
- Logging and audit trails for AI usage
These controls are especially important for remote or hybrid teams.
Practical Solutions for Small Businesses
Here’s how we typically help small businesses use AI safely:
Secure AI Adoption Plan
We help businesses:
- Identify where AI adds real value
- Assess data and compliance risks
- Select suitable AI platforms
- Implement secure configurations from day one
AI Usage Policy and Staff Training
We create:
- Simple, plain-English AI policies
- Short staff training sessions
- Ongoing awareness reminders to reduce human error
Education is one of the most effective security controls.
Microsoft 365 and Copilot Security Configuration
For Microsoft-based businesses, we:
- Secure Copilot access
- Apply DLP and sensitivity labels
- Restrict risky behaviours
- Align AI usage with GDPR requirements
Ongoing Monitoring and Review
AI risk is not a one-off exercise.
We provide:
- Regular security reviews
- Policy updates as tools evolve
- Incident response planning for AI-related data leaks
The Bottom Line
AI can be a huge productivity boost for small businesses — but only when used responsibly.
Without clear rules and security controls, AI tools can quickly become a data breach waiting to happen.
The good news is that secure AI adoption is achievable and affordable for small businesses with the right guidance.
