Shadow AI: Silicon Valley’s New Productivity Secret Is Also a Massive Liability

Shadow AI use can have real consequences for businesses—but there’s a smart way to handle it.

BY CHLOE AIELLO, REPORTER @CHLOBO_ILO

Illustration: Inc; Photo: Getty Images

Your employees are most likely using shadow AI. It’s a scary-sounding name for a relatively common practice, but one that could have real consequences for your business.

First, it helps to understand what shadow AI actually is, before unpacking strategies to prevent your employees from using it—and potentially exposing your company to reputational damage, litigation, or even financial losses.

According to Rick Holland, a cybersecurity expert and chief information security officer at AI-native cybersecurity firm Cyera, “shadow” refers to unsanctioned use of technology in the workplace. That can include software, hardware, or AI tools.

“It’s the use of a technology that the IT function, the business, the CTO is unaware of,” Holland says. “You don’t know who’s using it. You don’t know who has access to it. You don’t know the data that is being used.” If, for example, Microsoft Copilot is your company’s sanctioned chatbot, employees who turn to ChatGPT for work help are using shadow AI.

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A November report from cybersecurity firm UpGuard found that more than 80 percent of some 1,500 workers surveyed across the U.S., U.K., and other countries use unapproved AI tools at work—about half of them regularly. Even cybersecurity professionals aren’t immune, with an even higher proportion, some 90 percent, admitting to using shadow AI.

The first step in addressing shadow AI is recognizing employee motivations. And more often than not, those motivations are not nefarious, Holland says. As AI has swept the business world, workers are under pressure to be increasingly productive and be fluent in new technologies—otherwise, they could risk becoming redundant in a future experts warn will be defined by AI. Not to mention, they’re likely discovering that new, AI-enhanced tools are making their lives easier, and IT departments often don’t move quickly enough to support them.

“They’re trying to do their jobs, and they may have found a better, faster way to do it,” Holland says. “We all need to be learning AI right now, because it’s disrupting every vertical that’s out there.” 

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