AI Vendor & Tool Approval Checklist for Companies

Why You Need a Formal AI Tool Approval Process

Employees are discovering new AI tools every week. Without a formal approval process, your company will end up with dozens of unapproved AI tools processing company data — each one a potential security, privacy, or compliance risk.

A structured approval checklist gives your IT, security, and legal teams a consistent framework for evaluating AI tools. It also gives employees a clear path to request new tools, which reduces the temptation to use unapproved alternatives.

The Approval Process Overview

Step 1: Request Submission

An employee or department head submits a request for a new AI tool, including the business justification and intended use cases.

Step 2: Initial Screening

IT or the AI governance committee conducts an initial screening to determine if the tool is already covered by an existing approved tool, and whether the use case justifies the evaluation effort.

Step 3: Detailed Evaluation

If the tool passes initial screening, it is evaluated against the checklist below.

Step 4: Decision

The AI governance committee (or designated approver) reviews the evaluation and makes a decision: Approved, Approved with Conditions, or Rejected.

Step 5: Onboarding

If approved, IT onboards the tool with appropriate access controls, monitoring, and user training.

AI Vendor & Tool Approval Checklist

Part A: Business Justification

• Clear business problem or use case identified
• Existing approved tools cannot address the need
• Expected ROI or productivity benefit estimated
• Number of users and departments identified
• Budget allocated or funding source confirmed
• Business sponsor identified (department head or above)

Part B: Data Privacy & Protection

• Vendor's data processing agreement (DPA) reviewed
• Data residency confirmed (where is data stored?)
• Data stored in Singapore, Malaysia, or an approved jurisdiction
• Vendor does NOT use customer inputs for model training (confirmed in writing)
• Data retention policy reviewed and acceptable
• Data deletion/export capability confirmed
• PDPA (Singapore) compliance confirmed
• PDPA (Malaysia) compliance confirmed
• Cross-border data transfer mechanisms documented
• Personal data processing impact assessment completed (if applicable)

Part C: Security

• SOC 2 Type II certification (or equivalent)
• ISO 27001 certification (or equivalent)
• Encryption in transit (TLS 1.2+)
• Encryption at rest (AES-256 or equivalent)
• Single sign-on (SSO) support
• Multi-factor authentication (MFA) support
• Role-based access controls (RBAC)
• Audit logging and access logs available
• Penetration testing conducted (within last 12 months)
• Vulnerability disclosure programme in place
• Incident response plan documented
• Vendor's security team is responsive and competent (assessed)

Part D: Compliance & Legal

• Terms of service reviewed by legal
• Intellectual property terms acceptable (company retains ownership of outputs)
• Indemnification clauses reviewed
• Liability limitations reviewed and acceptable
• Industry-specific regulatory requirements met:
  • MAS TRM compliance (Singapore financial services)
  • BNM RMiT compliance (Malaysia financial services)
  • MOH guidelines (healthcare)
  • Other: [specify]
• Vendor's AI ethics/responsible AI policy reviewed
• Third-party sub-processor list reviewed

Part E: Enterprise Readiness

• Enterprise-grade SLA (uptime, support response times)
• Dedicated account manager or support contact
• Admin console for user management
• Usage reporting and analytics
• API access (if needed for integration)
• Scalability: can support projected user growth
• Vendor financial stability assessed (not at risk of shutdown)
• Migration/exit plan: data portability if switching vendors

Part F: Cost & Commercial

• Pricing model understood (per user, per usage, flat fee)
• Total cost of ownership calculated (licences + implementation + training)
• Contract term and renewal terms acceptable
• Price escalation protections (cap on annual increases)
• Free trial or pilot period available
• Comparison with alternative tools documented

Part G: Integration & Technical

• Compatible with existing IT infrastructure
• SSO integration tested
• API documentation reviewed (if applicable)
• Performance tested with expected workload
• Mobile access (if required)
• Browser compatibility confirmed
• No conflicts with existing security tools (DLP, CASB, etc.)

Evaluation Scoring

For each section, assign a score:

Decision Matrix:

Approval Record Template

Post-Approval Monitoring

Approval is not the end of the process. After a tool is approved:

• Quarterly reviews: Check for vendor security incidents, terms changes, and user feedback
• Annual reassessment: Re-run the full checklist annually
• Incident-triggered review: Any security incident involving the tool triggers an immediate reassessment
• User feedback: Collect and review user feedback on tool effectiveness and issues

Common Red Flags

Watch for these warning signs during evaluation:

1. Vendor uses customer data for training — This is a dealbreaker for most enterprise use
2. No SOC 2 or equivalent certification — Indicates immature security practices
3. Data stored in jurisdictions without adequate data protection — Creates PDPA compliance issues
4. No admin console or audit logs — Makes governance and monitoring impossible
5. Vague or missing DPA — Vendor is not taking data protection seriously
6. Startup with no financial runway — Risk of service discontinuation

Related Reading

• AI Policy Template — The governance framework that vendor approvals feed into
• AI Risk Assessment Template — Assess risks for each vendor and tool
• ChatGPT Approved Use Cases — A framework for evaluating approved use cases per tool