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The rise of Shadow AI by Ben Davey MSc

The rise of shadow AI presents a complex challenge for modern organisations. By understanding the factors driving this trend and its implications, organisations can develop strategies to mitigate the associated risks. Recognising the allure and potential hazards of third-party AI applications is the first step towards fostering a secure and compliant digital environment.

Understanding Shadow AI

A subset of “Shadow IT”, Shadow AI refers to the unsanctioned use of AI applications within an organisation. Employees might turn to AI tools to solve immediate problems. While these tools can often meet their promise of boosting productivity, they also bypass critical security and compliance measures, exposing organisations to potential risks of uncontrolled AI.

The allure of AI applications

According to Salesforce, 49% of people have used Gen AI, with over one-third of these users tapping into the technology daily and planning to use it even more.

Third-party AI applications, such as ChatGPT, are appealing due to their ease of use and powerful features. They can enhance efficiency and provide quick solutions to specific issues. For instance, a marketing team might use an AI tool to generate content ideas rapidly, or a sales team might use it to analyse customer data trends. However, the lack of formal approval means these applications are not vetted for security, leading to potential data breaches and compliance violations.

The implications of Shadow AI

Recognising Shadow AI as one of the most important AI trends in 2024, IBM emphasises the increasing potential for legal, regulatory, economic, and reputational risks due to the growing accessibility of generative AI tools.

The rise of Shadow AI has some serious implications for organisations:

  • Security risks – Unapproved AI applications could lack the robust security measures required, making the organisation vulnerable to data breaches and cyber-attacks. It’s easily done. Take, for example an employee who uses Open AI’s Chat GPT to translate sensitive documents. Is that sensitive information now safe? Your employee may think so. But the answer can be complex to ascertain and may not be what you want to hear. Another example could include a developer integrating a third-party AI API into a company system without conducting proper vetting, making the system susceptible to data breaches and creating vulnerabilities.
  • Governance violations – Using unsanctioned tools can result in non-compliance with industry regulations such as copyright or data privacy laws such as GDPR. For example, a marketing team using an AI tool to generate social media content, inadvertently using copyrighted material without permission, violating copyright laws.
  • Operational disruption – Shadow AI can create inconsistencies in workflow and data management, disrupting overall operational efficiency and creating fragmented data management. This fragmentation poses security risks and complicates data retrieval and analysis processes, impacting decision-making capabilities. The conundrum of different teams using different AI tools also leads to a lack of standardisation and potential integration issues.

Why Shadow AI flourishes

There are some good reasons why Shadow AI is flourishing:

  • Pressure for innovation – Impatient employees may turn to unapproved AI tools to meet deadlines or drive innovation quickly. The competitive business environment often pushes teams to seek out the latest tools that promise to enhance performance.
  • Lack of awareness – Many employees must be aware of the risks associated with using unapproved AI applications. They may need to realise that these tools could compromise data security or violate compliance regulations.
  • Inadequate IT support – Slow or unresponsive IT support can drive employees to seek alternative solutions independently. When official channels are perceived as bureaucratic or slow, employees may opt for quicker, albeit riskier, solutions.

Shadow AI and what you can do about it

In our next blog post, we will explore how organisations can mitigate the risk of Shadow AI.

If you have a question for Ben or the Triad team, please get in touch.