Shadow AI Emerges as a Growing Security Risk for Businesses

Businesses are facing a growing cybersecurity challenge as employees increasingly use AI tools that have not been approved by their organizations.

Known as Shadow AI, the practice can involve employees entering sensitive information, including client contracts, financial data and HR records, into AI platforms simply to make their work easier.

Research by BlackFog found that nearly half of employees at larger enterprises regularly share corporate data with AI tools that are not approved or monitored by their IT departments. Even when company-approved AI tools are available, 85% of employees continue using unauthorized alternatives.

The growing use of Shadow AI is raising concerns about data security, privacy and corporate governance. Sensitive information can leave an organization through AI platforms without security teams being aware of the activity.

The issue is also becoming a regulatory concern following the introduction of the EU AI Act, which places greater responsibility on organizations to understand, govern and monitor their use of AI.

According to IBM’s 2026 Cost of a Data Breach report, unauthorized tools contributed to 43% of data breaches over the past year.

As AI adoption expands, businesses are being urged to strengthen AI governance, monitor unauthorized tools and educate employees about the risks of sharing sensitive company information with AI services.