Companies Face Costs as AI Politeness Impacts Productivity

The EU AI Act, which applies to all organizations using or marketing AI systems within the EU, introduces strict risk-based requirements and substantial penalties for non-compliance, mirroring the severity of GDPR fines. This regulation affects companies worldwide, including those headquartered outside the EU, if their AI outputs are accessible to EU users. Businesses must classify AI systems by risk level and implement robust governance and transparency measures to avoid hefty fines. The Act’s reach underscores the importance of clear AI policies for legal, ethical, and data privacy compliance, especially as employees increasingly use generative AI tools—sometimes without employer oversight—raising concerns around intellectual property, data breaches, and regulatory violations. Developing comprehensive internal AI policies can help organizations align with evolving laws, manage operational risks, and maintain client and regulator trust as artificial intelligence adoption accelerates.