Shadow AI, or unregulated and unauthorized AI tools used in the workplace, is increasing. This leaves Canadian businesses, from multinational corporations to growing small businesses, at serious security risk.
Flexibility and speed
Employees want everything as convenient and quick as possible. Consequently, they frequently turn to unregulated, shadow tools, exposing sensitive data to a greater risk of severe breaches. A new survey found that one in five businesses had suffered a data breach. Each of these breaches was the result of a security incident involving shadow AI. This troubling trend adds to worries that organizations cannot keep sensitive data safe.
Between March 2024 and February 2025, the average cost of a Canadian breach involving shadow AI surged by 10.4 percent, reaching an alarming $6.98 million. It has become more difficult for businesses to implement groundbreaking technologies. Further, they need to balance this desire with the need for data security. The ramifications from shadow AI, they say, can be lethal, particularly in light of its increasing presence in the American workplace.
Robert Falzon, a representative from Check Point, brought up a really scary point. He noted that discussions and information produced via shadow AI end up being saved and fed back into improving these unregulated tools. He emphasized the imperative for organizations to continuously guard against efforts to steal their data. “They want to be sure that things like data leakage don’t occur and that they’re not creating a greater risk than the benefit that they offer,” Falzon said.
Kareem Sadek, another expert in the field who worked on the Smart Columbus initiative, noted that organizations are generally risk-averse and slow to adopt cutting-edge technology. This delay can inadvertently encourage employees to find their own third-party solutions like shadow AI assistants. “It significantly reduces the use or holds the users or employees accountable,” Sadek explained. He added that when employees feel educated and aware of the risks associated with unauthorized tools, they take greater responsibility for their actions.
The rise of shadow AI has not only contributed to an alarming number of such cybersecurity attacks. Companies that have encountered security breaches involving shadow AI reported a 7 percent higher incident rate than those using sanctioned AI tools. All of these statistics combined create a rising imperative for organizations to rethink how they adopt technology and manage risk.
Cybersecurity researcher Ali Dehghantanha put together a highly effective audit. In less than 47 minutes, he was able to breach a Fortune 500 company’s internal chatbot and view sensitive client information in a matter of clicks. His discovery exposes the huge threats that follow organizations that fail to establish rigorous measures against unapproved AI use. “Not only for AI, for any technology, always consider the total cost of ownership,” Dehghantanha advised. He added, “One part of that cost of ownership is how to secure and protect it.”
Falzon stated that encouraging employees to be more educated about data breaches is an important first line of defense in establishing safeguards against data breaches. “That’s going to help make sure that customers are both educated and understand what risks they take, but at the back end of it, make sure that those risks are mitigated by technology protection,” he stated.
A zero-trust mindset is one of the best approaches organizations can take to address the rise of shadow AI tools. This early approach helps reduce risk by putting boundaries around which devices an employee can file things through a chatbot. Incorporate embodied experience workshops for staff. To further protect your organization, educate them on the risks that come with using unauthorized AI tools.
Sadek emphasized that a zero-trust approach secures your organization’s environment in addition to promoting a culture of accountability among your staff. “They feel accountable, especially if they’re educated and have awareness sessions on the risks,” he noted. Build a culture of accountability and education around data security among your employees. Taking these steps enables you to do a better job at protecting sensitive information from a data breach.
