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In the age of AI, companies must treat privacy not just as a compliance matter but as a reputational safeguard, since unclear policies now pose a serious reputational risk capable of damaging user trust and brand value and lead to potential regulatory challenges.
AI as a Trigger for Reputational Risk
For years, users ignored privacy policies and terms of service, clicking “accept” without reading. These documents were often seen as a box-ticking exercise, overloaded with legal jargon and statutory references. But with the rise of AI, the situation has changed dramatically.
Artificial Intelligence thrives on data. Users now fear their personal information may be used to train AI systems without their knowledge or explicit consent. This perception, whether accurate or not, amplifies reputational risk. A poorly drafted privacy policy that fails to explain AI usage clearly can fuel suspicion, spark backlash on social media, and force companies into crisis-management mode.
Privacy Policies: From Legal Requirement to Trust Enabler
Under the GDPR, privacy policies have to outline, among others,:
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processed personal data,
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purposes of data collection,
- legal basis of the data processing,
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third parties with whom data may be shared, and
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the sources of collected data.
While these disclosures remain legally necessary, the way they are communicated now carries equal weight. Overly complex texts may satisfy regulatory requirements, but they fail to build trust. When AI and personal data are at stake, clarity is not optional—it is a reputational shield. And even data protection authorities are emphasizing the need to implement legal design solutions since the information required under the GDPR shall not only be “provided”, but it shall be easily understandable by individuals.
Companies that ignore this shift expose themselves not just to fines under the GDPR and soon under the AI Act but to reputational risk that can linger long after a regulatory investigation is closed. In the era of AI, privacy management has become a strategic tool for protecting both compliance and brand integrity.
Clarity vs. Compliance: A Delicate Balance
Rewriting terms and conditions to address AI concerns is no simple exercise. Organizations face a dual challenge:
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Ensuring strict compliance with data protection and consumer laws.
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Communicating with users in clear, accessible language to avoid mistrust.
The reputational risk of failing to achieve this balance is high. In the past, dense policies were tolerated. Today, a lack of clarity on how AI systems process data can spark public outrage and damage corporate reputation within hours.
From Crisis Response to Prevention
Recent disputes demonstrate this dynamic. Some major tech players have faced criticis after updates to their T&Cs raised concerns about AI data use. In several cases, companies had to publish clarifying statements or FAQs to calm users.
The lesson is clear: prevention is better than crisis management. Modern privacy policies are being redesigned to include plain-language summaries, user-friendly explanations, and even infographics. Legal teams increasingly work alongside marketing and communications experts to ensure consistency and readability. This proactive approach reduces reputational risk while strengthening trust.
Bridging the Knowledge Gap on AI
At the heart of the issue is a knowledge gap. Companies possess advanced expertise in AI technologies, while users often struggle to understand how their data is processed. This imbalance fuels fear and uncertainty.
Transparent communication can help bridge this gap. Explaining AI in simple, accurate terms empowers users and reduces the “black box” perception of AI systems. Companies that educate their users not only reduce reputational risk but also position themselves as trustworthy industry leaders.
The First True “AI Privacy Crisis”
We are witnessing what many consider the first genuine “AI privacy crisis.” After years of clicking through policies without concern, users now worry that their data may be misused for AI training or other opaque purposes. This shift in perception means businesses can no longer afford to treat policies as hidden legalese.
Instead, AI, privacy, and reputational risk must be addressed openly, with clear communication that anticipates user fears and answers them directly.
The Future of Privacy Management in the AI Era with Legal Design
Looking ahead, transparent privacy management is evolving into a strategic pillar of corporate reputation. Companies that fail to adapt face not only regulatory fines but also reputational harm that is costly—and sometimes impossible—to repair.
The future depends on three pillars:
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Clarity: Policies must eliminate unnecessary jargon and explain AI use in simple terms.
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Engagement: Legal, compliance, and marketing teams must collaborate to deliver messages users trust.
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Education: Companies should bridge the knowledge gap, empowering users to understand AI’s role in data processing.
In this scenario, legal design solutions have a key role in balancing privacy compliance and business needs creating a bond of trust between companies and their customers who will be loyal to brands when they can understand what they do with their data. AI, privacy, and reputational risk are now intertwined in a way that reshapes corporate communication strategies. Privacy policies are no longer back-office compliance tools—they are front-line trust enablers.
Organizations that succeed in creating transparent, accessible policies will not only reduce reputational risk but also gain a competitive advantage. In a digital economy where user trust is the ultimate currency, the winners will be those who see privacy as more than compliance—and AI as more than a threat, but as a driver of accountability and trust.
At DLA Piper, we created a business line dedicated to legal design made of lawyers and designers that combine their expertise to provide clients with solutions that can meet their needs. On the topic, you can read the article “Legal Design: An image is worth a thousand words for legal concepts“.