What are the negative impacts of using "shadow AI" at work?

Many employees use AI at work every day. Why not? A few seconds can save hours of work.

• Sarah uploads customer data into AI to finish a weekly trend report faster.

• Alex uses AI to draft client emails to clear his inbox more efficiently.

• David uses AI to summarize internal data to save time before a big meeting.

Sounds smart, right?

Not necessarily.

Using AI at work isn't the problem. In many cases, it can improve productivity and save time.

The problem begins when employees use AI tools that haven't been approved by their organization.

This is known as shadow AI. Sarah, Alex, and David are about to discover that using shadow AI can cause serious problems at work for themselves and their company.

Sarah was proud of her quick shortcut. But what she didn't realize is that she fed important customer details to the AI.

The moment we press enter, that information may be stored by the AI system.

Here is what happens behind the screen:

• Permanent memory: Many free AI tools often store everything you type to train their models.

• No "undo" button: Once data is absorbed into the AI model, retrieving or deleting it is nearly impossible.

What could happen next for Sarah and her company?

• Data leak risk: Because customer data was entered into the AI tool, that confidential information could appear in outputs seen by users outside the company, including competitors.

• Legal and regulatory penalties: The company can face legal action for breaking customer data protection laws. Many countries have such laws, like General Data Protection Regulation (GDPR) and Personal Information Protection and Electronic Documents Act (PIPEDA).

Alex thought he was safe because he carefully polished every email draft the AI gave him.

He was wrong! An IT security scan found an email draft with company information shared on an unapproved AI platform, triggering a compliance alert.

Alex spent the night worrying about what would happen next.

But Alex's mistake wasn't just about getting caught.

By using shadow AI, he went against his company’s guidelines for protecting information.

Why does it matter to Alex and his company?

• Missing security checks: Approved AI tools are checked for security before employees can use them. Unapproved tools may not go through these checks, so they may not be safe for handling company information.

• Breaking company rules: When employees use unapproved AI tools, the company can’t easily track how information is being used. This makes it harder to manage data safely and follow company rules.

David felt totally confident presenting his quick AI-generated report summary in the big meeting.

Until his manager stopped him and pointed out the wrong information. David froze — he had no idea the AI tool had lied to him.

His manager confronted him about his use of shadow AI.

Manager: “David, where did you get this from?”
David: “From the AI summary…”
Manager: “This is an example of AI hallucination. Did you know AI can give wrong or made-up information?”
David: “I only wanted to finish it quickly…”
Manager: “What you’re doing is shadow AI. If unverified AI output is used in reports or decisions, it can lead to wrong outcomes and serious business risk.”
David: “I didn’t realize it put the company at such risk…”
Manager: “That’s why we only rely on company-approved tools.”

What's the key takeaway?

Always rely on approved AI tools at work because they're checked for security, follow company rules, and are designed to protect sensitive information. Using unapproved tools can lead to data leaks, wrong information in decisions, and business risks.

Taylor works in the hiring department and has a huge pile of job applications. To save time, Taylor copies the applicants' resumes into a free AI tool to get recommendations.

Want to use AI more safely in your daily work?

Use this quick checklist to help you avoid risks when working with AI tools: