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Shadow AI in the Workplace: Why Every Denver SMB Needs an AI Governance Policy

AI governance policy

Your business probably already needs an AI governance policy, even if you don’t think anyone is using AI. Employees don’t wait for formal approval to try tools that make their jobs easier. They’re already using ChatGPT, Claude, Microsoft Copilot, AI meeting assistants, writing tools, coding assistants, and dozens of browser extensions.

A practical AI governance policy doesn’t slow innovation. It makes AI safer, more productive, and far less risky for your organization. The businesses succeeding with AI aren’t banning it. They’re giving employees approved tools and clear expectations. 

If you’ve already read our guide on AI Governance Frameworks, think of this article as the next step. A framework defines your overall strategy. An AI governance policy tells employees exactly how to put that strategy into practice

What Is an AI Governance Policy?

An AI governance policy is simply the set of rules your employees follow when using artificial intelligence at work. It answers questions like:
  • Which AI tools are approved?  
  • What company information can employees enter into AI?  
  • Which AI tools are prohibited?  
  • Who approves new AI applications?  
  • How should employees verify AI-generated content?  
  • What happens if someone wants to use a different AI tool?  

Many business owners hear the word “governance” and assume it’s complicated, but it’s not. I think of it as establishing the rules around how and when your company uses AI. Once you frame it that way, it becomes much easier for everyone to understand and follow.

What Is Shadow AI?

Shadow AI refers to employees using AI tools without company approval or IT oversight. Usually, employees aren’t trying to break company policy. They’re trying to work faster.
Maybe someone signs up for Claude because they like the writing style better. A developer downloads an AI coding assistant. Someone uploads a spreadsheet into a free AI tool to summarize data. The intention is productivity. The problem is that the business often has no idea it’s happening.

How Can You Tell Employees Are Already Using Unauthorized AI?

One of the biggest clues is surprisingly simple. At Onset Solutions, we regularly receive requests from employees asking for administrator privileges so they can install AI applications like Claude on their company computers. That’s often the first indication the organization has shadow AI already happening.
Other warning signs include:
  • Employees requesting browser extensions or AI plug-ins  
  • Unexpected AI-related software downloads  
  • Staff referencing AI-generated content in meetings  
  • AI-written emails appearing across the organization  
  • Developers asking for help connecting AI tools to applications  
  • Multiple employees asking about different AI platforms  

When this happens, we don’t automatically deny the request. Instead, we contact company leadership. Our conversation usually starts with: “We’re seeing employees request AI tools. Let’s talk about how you want AI used inside your organization.” 

That discussion often becomes the starting point for creating an AI governance policy. 

Can You Just Ban AI at Work?

Technically? Yes. Practically? Not really. Employees want tools that make their jobs easier. If they can’t use approved AI, many will simply find another way. Instead of banning AI, I recommend giving employees one approved platform and making that the standard.
For many organizations using Microsoft, that could be Microsoft 365 Copilot because company data stays within your Microsoft environment instead of flowing into public AI systems when it’s properly configured. There are also security tools that can:
  • Restrict access to unauthorized AI websites  
  • Redirect employees to approved AI platforms  
  • Monitor which AI applications employees use  
  • Alert administrators when new AI tools appear  
The goal is to eliminate AI uncertainty and not AI use.

What Are the Biggest Risks of Shadow AI?

Every business faces some level of risk, but organizations handling sensitive information have the most to lose. That includes:
  • CPA firms  
  • Healthcare organizations  
  • Nonprofits  
  • Dental practices  
  • Financial services firms  
  • Law firms  
  • Human resources departments  
The biggest concern is employees unknowingly entering sensitive information into public AI platforms. That could include:
  • Client records  
  • Personally identifiable information (PII)  
  • Financial data  
  • Proprietary company information  
  • HR records  
  • Internal business strategies  
I often explain that if you wouldn’t hand that information to a stranger at a coffee shop, don’t paste it into a public AI tool. That’s a simple rule employees remember.

AI Doesn't Create Security Problems. It Exposes Existing Ones.

This is something many business owners misunderstand. AI isn’t creating poor security. It’s revealing the poor security that already existed.  

If your file permissions are messy, AI will work with messy permissions. If HR files are stored in the wrong folders, AI may surface information people shouldn’t see. If everyone has access to everything in Microsoft 365, AI inherits those permissions. That’s why we tell clients to clean house before implementing AI. Organize files, review permissions, remove unnecessary access, and build a strong foundation first.  

How to Create an AI Governance Policy

A good AI governance policy doesn’t need to be 40 pages long. It just needs to be practical. 

Step 1: Choose Your Approved AI Platform

Don’t leave employees guessing. Select the platform your company supports and purchase appropriate business-tier licensing. Whether that’s Microsoft Copilot or another approved enterprise AI solution, everyone should know what they’re expected to use.

Step 2: Define What Information Can Be Shared

Clearly explain what employees may enter into AI. Also, explain what they cannot. This includes client information, financial records, employee data, passwords, API keys, source code, and confidential contracts.
Even experienced employees don’t always recognize sensitive information until they’re trained.

Step 3: Train Your Employees

Policies sitting in a handbook don’t change behavior, but training does. Employees need to understand:
  • Why public AI can be risky  
  • Which tools are approved  
  • How to write effective prompts  
  • When human review is required  
  • How AI helps productivity  
Training also reduces fear. Many employees assume they need a specific AI platform to do great work. In reality, most leading AI tools perform very similar tasks. The company simply needs everyone to use the same approved environment.

Step 4: Review Security Permissions

Before expanding AI across your organization, review:
  • Microsoft 365 permissions  
  • SharePoint permissions  
  • OneDrive access  
  • Teams structure  
  • Security groups  
  • File organization
AI only knows what your employees can already access. If permissions are too broad today, AI simply makes those problems easier to uncover.

Step 5: Review the Policy Regularly

AI changes quickly. Your policy should evolve with it. Review approved tools, employee feedback, and new business needs at least annually.

AI Should Help Your Business, Not Surprise It

At Onset Solutions, we see our role differently from some companies entering the AI space.
We’re not trying to pitch every new AI application that comes to market. Our focus is governance. We help organizations determine:
  • Whether Microsoft 365 is properly configured  
  • Whether file permissions are secure  
  • Whether employees have the right access  
  • Whether an AI governance policy is in place  
  • Whether the organization is ready to safely deploy AI  
Then you can confidently choose the AI solutions that make the most sense for your business. That governance-first approach is how we help clients prepare for AI adoption.

Ready to Build an AI Governance Policy?

Your employees are probably already experimenting with AI. The question is whether they’re doing it safely. A well-designed AI governance policy protects your business while allowing your team to benefit from the productivity gains AI offers.

If you’re unsure whether your Microsoft 365 environment, file permissions, or security policies are ready for AI, Onset Solutions can help. We’ll evaluate your environment, identify potential risks, and help you create practical governance that keeps your business secure without slowing innovation. 

Contact Onset Solutions today to start building an AI strategy your employees can use with confidence. 

Hilary Taylor  

Hilary is the CEO of Onset Solutions. She helps small and mid-sized businesses strengthen their IT strategy, improve cybersecurity, and streamline daily operations. With a practical, people-first approach, Hilary focuses on making complex technology simple, secure, and easy to use for growing organizations. 

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