AI Governance Framework for SMEs: A Practical Guide

AI governance sounds like something only large enterprises need. But as AI tools become embedded in everyday business operations, even small and medium businesses need guardrails.

The good news? You do not need a 50-page policy document. You need a practical framework that fits your size and risk profile.

What is AI Governance (And Why SMEs Need It)

AI governance is simply the rules and processes that guide how your organisation uses AI. It answers questions like:

• Who can use AI tools and for what purposes?
• What data can be shared with AI systems?
• How do we check AI outputs before acting on them?
• What happens when AI makes a mistake?

The Minimum Viable AI Governance Framework

For SMEs, we recommend a three-layer approach:

Layer 1: Acceptable Use Policy (The Rules)

This is a simple document that everyone in your organisation can understand.

Key Sections:

1. Approved AI Tools List which AI tools are approved for use:

• Approved: ChatGPT, Claude, Copilot (with guidelines)
• Requires approval: Custom AI solutions, third-party integrations
• Prohibited: Tools that store sensitive data without encryption

2. Data Boundaries Be explicit about what can and cannot be shared:

• Never input: Customer personal data, financial records, passwords
• Requires anonymisation: Customer feedback, sales data
• Generally safe: Public information, internal processes

3. Output Review Requirements Define when human review is mandatory:

• Always review: Customer-facing communications, legal documents
• Spot check: Internal reports, summaries
• Trust with verification: Code suggestions, formatting tasks

4. Attribution and Transparency When must you disclose AI use?

• Customer communications: Disclose if directly AI-generated
• Internal documents: Attribution optional but recommended
• Published content: Follow your editorial guidelines

Layer 2: Accountability Structure (The People)

Governance without accountability is just a document. Define clear roles:

Layer 3: Risk Management Process (The Safety Net)

Even with good policies, things can go wrong. Have a process ready:

Risk Identification Before deploying any AI use case, assess:

• What could go wrong?
• What is the impact if it does?
• How likely is it?
• What controls are in place?

Incident Response When something goes wrong:

1. Detect: How will you know there is a problem?
2. Contain: How do you stop further damage?
3. Assess: What was the actual impact?
4. Remediate: How do you fix it?
5. Learn: How do you prevent recurrence?

Regular Review Schedule quarterly reviews of:

• AI tool usage and any issues
• Policy effectiveness
• New risks from new tools or use cases

Implementing Governance: A 30-Day Plan

Week 1: Foundation

• Inventory current AI tool usage across the organisation
• Identify who is using what and for what purpose
• Note any incidents or concerns raised

Week 2: Policy Draft

• Draft Acceptable Use Policy using template above
• Get feedback from 2-3 key stakeholders
• Revise based on practical concerns

Week 3: Accountability

• Assign governance roles
• Brief role holders on responsibilities
• Set up basic reporting mechanism (even a shared spreadsheet works)

Week 4: Launch

• Communicate policy to all staff
• Provide brief training (30 minutes is enough)
• Schedule first quarterly review

Common Governance Mistakes

Mistake 1: Making It Too Complex A 50-page policy that no one reads is worse than a 2-page policy everyone follows.

Mistake 2: Not Enforcing It Governance without consequences becomes optional. Start with gentle reminders, escalate if needed.

Mistake 3: Set and Forget AI tools evolve rapidly. Your governance must too. Review quarterly at minimum.

Mistake 4: Ignoring Shadow AI People will use AI tools you have not approved. Better to acknowledge this and set boundaries than pretend it is not happening.

Governance and Compliance

Your AI governance should align with existing compliance requirements:

Template: Simple AI Acceptable Use Policy

Here is a starter template you can adapt:

# [Company Name] AI Acceptable Use Policy

## Purpose
This policy guides the responsible use of AI tools at [Company].

## Scope
Applies to all employees using AI tools for work purposes.

## Approved Tools
- [List approved tools]

## Data Rules
- Never input: [List prohibited data types]
- Always anonymise: [List sensitive data types]

## Review Requirements
- Customer-facing content: Always human review
- Internal documents: Spot check weekly

## Reporting
Report concerns to [AI Lead name] at [email].

## Effective Date
[Date]

Measuring Governance Success

Track these metrics to know if your governance is working:

Next Steps

1. Start with an inventory of current AI usage
2. Draft a simple policy using the template above
3. Assign accountability to specific people
4. Communicate and train your team
5. Review quarterly and iterate

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