Shadow AI: What it is, why it’s a risk and what you can do about it.
AI is everywhere right now. Whether it’s writing emails, analysing data, or brainstorming ideas, artificial intelligence tools like ChatGPT are helping employees across all industries work smarter and faster.
But while AI offers incredible productivity gains, it also comes with a growing risk for UK businesses: Shadow AI.
And with 95% of cyber breaches caused by human error*, it’s something business owners need to take seriously.
What is Shadow AI?
Shadow AI is today’s iteration of Shadow IT.
With Shadow IT, teams bypassed the IT department to sign up for apps and cloud services, often to move faster. The result? A lack of visibility, rising costs, and risks to data security.
Shadow AI takes this a step further when employees use free AI tools like ChatGPT without approval or oversight. And while these tools boost productivity, they come with hidden dangers.
Most free AI tools store the data you enter to improve their models. That means sensitive business information could be exposed or reused elsewhere. Worse still, there’s no cost trail, so it’s hard to track who’s using what.
Left unchecked, Shadow AI can lead to data breaches, regulatory issues, and a loss of control, all while flying under the radar.
Why it happens
Let’s be honest, AI is super helpful. It can save hours of repetitive work and streamline admin-heavy tasks. If your team doesn’t have access to approved tools or guidance on how to use them, they’ll go out and find their own.
That’s Shadow AI. And it’s growing.
In fact, **Forrester has warned of a “shadow pandemic” of unregulated AI use in businesses, while ***Gartner reports that nearly half of HR leaders are now putting formal AI usage guidelines in place.
The risks for your business
Without the right controls, Shadow AI can lead to:
Data privacy and security breaches
Many AI tools process the information you feed them, which might include client names, financial info, passwords, or confidential documents. If that data ends up in the wrong hands, your business could face GDPR violations, financial penalties, or a serious reputation hit.
Compliance failures
AI is a fast, moving space. Regulations are emerging rapidly, both in the UK and globally. If your team is using unvetted tools, you could easily fall foul of new laws, putting you at risk of legal action.
Misuse or misunderstanding of AI outputs
AI can be smart, but it’s not always right. If employees don’t understand how to use it properly, they could base decisions on flawed or biased outputs, damaging performance or customer trust.
Lack of visibility
When AI tools are being used behind the scenes, there’s no audit trail. No accountability. No oversight. That makes it harder for business leaders to ensure data security, compliance, or even basic quality control.
How UK businesses can tackle Shadow AI
The solution isn’t banning AI, it’s about using it wisely.
As an IT company specialising in Cyber Essentials, we help businesses like yours protect data and systems by building cyber resilience from the ground up. And when it comes to Shadow AI, prevention is absolutely better than cure.
Here’s how to get started:
- Provide Approved, Secure AI Tools
Get ahead of the problem. Talk to your team, find out how they’re using AI, and offer secure, company, approved tools they can use with confidence. This reduces the temptation to go rogue with unvetted alternatives. - Create a Clear AI Usage Policy
Spell out which AI tools are approved, what kind of data can be used, and how employees are expected to apply outputs. Make it part of your wider cybersecurity and acceptable-use policy, and keep it updated as the tech evolves. - Invest in AI and Cybersecurity Training
Most people don’t realise how easily a simple action, like pasting a customer’s email address into an AI prompt, could lead to a breach. With regular training, you can equip your team to use AI responsibly and understand the potential risks and rewards. - Promote Transparency and Open Dialogue
Encourage staff to ask questions and talk about their AI use. Building a culture of openness helps you identify new needs early, stay on top of tool usage, and foster innovation, safely.
Shadow AI is a risk, but it’s manageable
Used wisely, AI can be an incredible asset. But to stay protected, UK businesses need to be proactive, especially as cyber threats evolve and regulations tighten.
The bottom line?
You can’t manage what you can’t see.
So, shine a light on Shadow AI. Build awareness, create policies, offer the right tools, and most importantly, train your people.
Need help navigating AI safely while staying compliant with Cyber Essentials?
We’re here to support UK SMEs with practical, cost-effective solutions.
From secure tool recommendations to staff training and policy creation, we’ll help you take control of Shadow AI before it becomes a problem.
Get in touch with our team to talk about your AI strategy, Cyber Essentials compliance, or employee training. Let’s make sure your business gets the best of AI, without the security risks.
Source:
* Infosecurity Magazine
** Forrester Predictions 2024: Tech Leaders Boost Ops To Grow With AI
*** Gartner Survey Finds Only 5% of HR Leaders Report Their HR Function Has Implemented Generative AI
