AI plays a major role within your organization, whether you realize it’s being used  or not. While many businesses scramble to figure out how to use AI best, one less talked about concern for business owners is: do you even know how your team is already using it, and if you do, are you aware of the potential harm unapproved AI tools (aka shadow AI) can cause? Without proper controls in place, you may be inadvertently opening your company data to any number of potential threats. 

Why is Shadow AI Risky?

Shadow AI is defined as the unauthorized use of an AI tool, Large Language Models (LLM’s), or autonomous agents within the organization without the approval, oversight, or visibility of IT and security teams. 

The shadow AI statistics are staggering. According to SQ Magazine, more than 80% of employees are using unapproved AI tools at work, and nearly half (45%) admit they’re doing so without telling their employer. That lack of visibility can be costly, with research showing that a single shadow AI-related data breach can cost organizations upwards of $670,000.

Let’s be honest – your employees are probably using ChatGPT or Gemini to get their work done faster, and that’s not necessarily the problem. The problem is what they’re feeding into these tools. Without any guardrails in place, sensitive company data and customer information can walk right out the door without anyone realizing it. In fact, SQ Magazine found that 38% of employees are already sharing sensitive information through unregulated AI tools, and your company has no way of knowing what was shared or where it ended up.

The fallout can be very real. Entering company data into a public AI tool could violate an NDA, since that information may become searchable or influence future model training. Even something as innocent as typing in a customer’s name, address, or email could put you in violation of your Cyber Insurance policy, HIPAA, or SOC compliance requirements. In fact, 65% of shadow AI incidents resulted in PII exposure. The bottom line is: if you don’t have a governed AI strategy in place, you’re taking on a risk that most companies can’t afford.

What Can Businesses Do to Protect Themselves from Shadow AI Usage?

First, make sure you have some sort of governance around the use of AI. Be sure to have language in your Employee Handbook that stipulates how AI is to be used. Specifically, around what information can or cannot be shared within those systems. By protecting the company in this way, if something were to happen, you always have a mechanism in place that will protect the company from future issues. 

Second, if you know the end users are using AI, then step in and meet them where they are. Provide the end users with a sanctioned solution that will give them everything they need. By choosing an enterprise solution (Claude, Copilot, ChatGPT), you will be able to control access to the data that is being used and control who has access to the data. 

This makes sure that the Intellectual Property that is being developed will be owned by the company and not the individual user. You will be able to audit the information being presented in the event of a breach. You will be able to lock down user access when someone leaves the company, protecting the information stored within. 

Finally, you should run scans against the systems to see what tools are being used on their computers. Having a basic inventory will give you an idea as to who is using what applications and allow you to ask questions about why they need them. It will also give you insight into the people that have unsanctioned AI tools at large. This process will not find everything out there, but again, visibility into what the people are using is key to controlling the data. 

How Can Businesses Get the Benefits of AI Without the Risk?

Overall, AI is not a bad thing. With proper guidance, AI is a great thing. It increases productivity. It can help with those mundane tasks that no one wants to do. It can perform those time-sensitive functions on time and provide accurate information without having to lift a finger. Forbes found AI can improve task performance by 14% to 55%, depending on the work being done. This is AI as it is intended to be used, but by allowing people within your organization to continue to use shadow AI, the risk outweighs the benefits.

If your organization is starting to think seriously about AI governance, now is the time to put the right policies and tools in place. If you’d like help creating a practical governance framework, we are happy to talk.