Part 1: What is Shadow AI and the risks of ignoring it

As a reformed Shadow IT employee, I know the risks and value of getting on with it.

Today I start a three part series on Shadow IT, it’s worth the journey. If you haven’t already embraced AI in your workplace, this is a must read, i’ll lay out what’s going on that you’re not aware of, and then how to secure your IP through proactive governance.

Shadow AI is not a new phenomenon, but its scale and impact have shifted dramatically. It refers to the use of artificial intelligence tools, models, or services within an organisation without formal approval, oversight, or integration into enterprise governance frameworks. It’s often framed as a risk, but I’d argue it’s also a signal, a sign that people are trying to move faster than the organisation is currently designed to support.

The rise of Shadow AI is not surprising, the accessibility of generative AI tools, the pressure to deliver more with less, and the lag between innovation and policy have created a perfect storm. Employees are experimenting with AI to automate tasks, summarise documents, generate content, or analyse data - often without waiting for formal approval, and a boss who’s happy to accept the outcome without asking for the “how”. This isn’t malicious, it’s pragmatic, it’s naive and the employee will get the blame for the organisations willful ostrich like head burying.

The risks are not theoretical, never have been and are clear as day in the terms and conditions of the tools your employees are using for free. What so many people love to forget is:

If you’re not paying for the product, you are the product

Sensitive data is being exposed to third party platforms, outputs may be inaccurate, biased, or untraceable. Regulatory compliance can be breached without anyone realising. Worse, decisions made using ungoverned AI can’t be audited or explained. This creates a liability not just for IT, but for the business as a whole.