The rapid adoption of artificial intelligence (AI) tools across industries has unlocked tremendous opportunities for innovation, efficiency, and productivity. However, as employees experiment with AI platforms on their own, often without formal approval or oversight, a new cybersecurity threat is emerging: Shadow AI. Like Shadow IT before it, Shadow AI refers to the unsanctioned use of AI technologies within an organization, and it can pose serious data breach risks if not managed properly.
In this blog, we’ll explore what Shadow AI is, why it presents a security challenge, how it could lead to data breaches, and what organizations can do to mitigate the risks.
Shadow AI occurs when employees or teams within an organization begin using AI-powered tools or models without the knowledge or approval of their IT, security, or compliance departments. This includes a wide range of AI technologies, such as:
While many of these tools can improve efficiency, they often operate outside the organization's established data governance, security, and compliance frameworks. Employees may upload sensitive documents to language models, use AI platforms that lack proper security measures, or even train internal AI models using proprietary or customer data, all without appropriate oversight.
There are several reasons why Shadow AI is becoming more prevalent and more dangerous:
AI platforms are widely accessible, often through free trials, cloud-based applications, or personal subscriptions. Employees can easily experiment with these tools using just a browser or an app, making it difficult for IT teams to monitor or control usage.
Many AI tools used in a Shadow AI context have not gone through the organization’s standard vendor risk management or security assessments. This means vendors may process or store sensitive company data with unknown or inadequate security practices.
Depending on the nature of the data being processed, Shadow AI could violate data privacy laws such as the FTC Safeguards Rule, HIPAA, or industry-specific regulations. Once data leaves the organization's controlled environment, maintaining compliance becomes far more difficult.
In many cases, employees are not acting maliciously but are simply unaware of the risks. They may view AI tools as harmless productivity boosters, not recognizing that uploading confidential financial reports, source code, or customer information could expose the company to serious breaches.
The unsanctioned use of AI tools creates several specific pathways for data breaches and security incidents:
When employees input confidential information into AI models, that data may be stored by the vendor, used to train models, or be accidentally leaked in future outputs. If the AI vendor suffers a breach, your organization’s data may be part of the exposure.
Employees with legitimate access to sensitive data may inadvertently or intentionally use Shadow AI tools to extract, analyze, or share information in ways that violate company policies or intellectual property protections.
Many newer or less-established AI vendors may not have robust cybersecurity protections. Using unvetted platforms can expose your organization to third-party vulnerabilities, such as weak API security, insufficient encryption, or poor access controls.
Employees may use AI platforms to draft reports, analyze proprietary data, or assist in product development, inadvertently sharing intellectual property that could be exposed to competitors or hostile entities through the AI vendor’s systems.
Fortunately, organizations can take proactive steps to reduce the risks posed by Shadow AI while still leveraging the power of AI safely and effectively.
Develop and communicate clear policies regarding the use of AI tools. These policies should outline:
Offer employees vetted and approved AI platforms that meet your organization’s security and compliance requirements. Providing safe alternatives reduces the temptation for employees to seek out unauthorized tools.
Conduct regular training sessions to educate staff on the risks associated with Shadow AI. Emphasize data security, compliance obligations, and the potential consequences of using unapproved tools.
Use advanced monitoring tools to detect unauthorized AI tool usage on company networks and devices. Look for unusual traffic patterns, unsanctioned API calls, or AI-related software installations.
Expand your third-party risk management program to include AI vendors. Evaluate their security controls, data handling practices, and compliance certifications before approval.
The development of AI over the past number of years is excitinging for what it is capable of, including increased efficiency, organized data, cost cutting, and so much more. Those organizations that are not embracing AI are quickly falling behind.
But like any technological advancement, organizations are wise to proceed with caution. The risk of Shadow AI is not one to be ignored. Proactive governance is key to managing this risk: clear policies, employee education, secure AI alternatives, and effective monitoring. By acknowledging the existence of Shadow AI and implementing strong controls, organizations can harness AI’s benefits while protecting sensitive data, maintaining regulatory compliance, and avoiding costly data breaches.
Is your organization struggling to manage AI advancement? Are your employees using AI regularly with little oversight? Don’t panic, but seek qualified IT help as soon as possible.
As a managed IT provider, our expertise spans across the CPA, financial services, legal, and healthcare industries. PK Tech is proud to be in partnership with Microsoft, specializing in cloud solutions, cybersecurity, and networking, and also boasts the SOC 2 Type II accreditation. Does your organization need support with proper drive crushing? Get in touch with our team here.