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Shadow IT Risks Explored

A data analyst using many EUC tools to complete his data analysis work. He sits at a desk with six computer screens.

Shadow IT introduces hidden threats that can undermine your business's security and compliance. 

Read this article to discover what shadow IT is, why employees resort to using it, and how it can jeopardise your operations. You’ll get effective strategies to combat these risks and secure your digital transformation journey, ensuring robust data protection and operational efficiency.

What Is Shadow IT?

Shadow IT can be defined as the use of information technology systems, devices, software, applications, and services without explicit IT department approval. It arises when employees use personal devices or unauthorised software to bypass corporate IT controls, often in a bid to enhance productivity or solve immediate problems.

Examples of Common Shadow IT Practices

  • Personal Devices: Employees use their own laptops, smartphones, or tablets to access and store company data.

  • Unsanctioned Software: Installation of non-approved applications like personal cloud storage (e.g., Google Drive), project management tools, or messaging apps.

  • SaaS Applications: Using third-party Software-as-a-Service (SaaS) applications without IT knowledge can lead to data being stored in unapproved locations.

These practices, while often well-intentioned, can create significant security and compliance challenges for businesses. The lack of oversight means that shadow IT resources might not adhere to the same security protocols as sanctioned systems, increasing the risk of data breaches and other security incidents.

Why Do Employees Engage in Shadow IT?

Employees often turn to shadow IT to meet their needs quickly and efficiently, especially when they feel that the sanctioned tools are insufficient. 

Here are some common reasons:

  • Employees might use personal devices or unsanctioned software to complete tasks more quickly, bypassing lengthy approval processes.

  • Employees enjoy experimenting with new tools and technologies that help them tailor their workflows to suit their individual needs better.

  • Employees might not be fully aware of the risks associated with using unsanctioned IT resources or may not know about the approved tools available to them.

  • The increase in employees working remotely and Bring Your Own Device (BYOD) policies has blurred the lines between personal and professional technology use, making it easier for shadow IT to flourish.

The Impact of Remote Work on IT Security

Remote work has significantly increased the prevalence of shadow IT. With employees accessing company resources from various locations and devices, it becomes challenging for IT departments to maintain control and oversight. This decentralisation leads to a greater risk of security vulnerabilities, data breaches, and compliance issues.

Industries Most Affected by Shadow IT

Certain industries are particularly susceptible to shadow IT due to the sensitive nature of their data and the stringent regulatory environments they operate in.

Financial Services

In the financial sector, shadow IT can lead to severe non-compliance with GDPR, causing significant fines and reputational damage.

For instance, employees might use unsanctioned financial modelling tools or personal cloud storage for client data. This can result in data breaches where sensitive financial data, such as transaction records or personal client information, is exposed to unauthorised parties.


Additionally, shadow IT can complicate audit trails, making it difficult to track financial transactions and comply with financial regulations.


Storing patient information in unapproved cloud services can lead to violations of the Data Protection Act 2018

This may happen if unofficial apps are used for scheduling appointments or sharing patient records through personal email accounts.


Such practices can expose patient data, including medical histories and personal identifiers, to data breaches. This not only results in legal consequences and hefty fines but also undermines patient trust and the integrity of healthcare services. For example, a data leak involving sensitive patient information could lead to identity theft or misuse of medical records.

Energy and Utilities

Shadow IT poses a risk to the reliability and security of critical infrastructure. Employees might use unapproved software to manage operational data or personal devices to control industrial systems. 

This can lead to vulnerabilities where malicious actors exploit these shadow IT resources to disrupt services or cause operational failures. 

For instance, an attack on unsanctioned software managing energy distribution can lead to widespread outages, safety hazards, and significant financial losses due to downtime and recovery efforts.

By addressing these specific risks, businesses can better understand the unique challenges posed by shadow IT in their respective industries and take targeted actions to mitigate these threats.

What Are the Risks of Shadow IT?

Shadow IT introduces several risks that can significantly impact an organisation’s security, compliance, and operational efficiency.


Here are the primary risks associated with shadow IT:

Data Breaches

Shadow IT often bypasses the security measures established by the IT department, making it a prime target for cyberattacks. Unauthorised applications and devices may not have the necessary security protocols in place, increasing the risk of data breaches. 

For example, using personal cloud storage for sensitive company data can lead to illegal access and data leaks​​​​.

Unauthorised Access

Without IT oversight, shadow IT can lead to unauthorised access to sensitive data. Employees might unintentionally expose company data to cybercriminals by using unsecured devices or software. This lack of control can result in significant security vulnerabilities​​​​.

Malware and Ransomware

Shadow IT systems are more susceptible to malware and ransomware attacks. Unofficial applications may not receive regular security updates, making them vulnerable to exploits. This can lead to severe disruptions and financial losses for an organisation​​​​.

Operational Inefficiencies

Shadow IT can create data silos, leading to inconsistencies and inefficiencies in data management. Different departments might use various unofficial tools, making it difficult to integrate data and streamline operations. This fragmentation can slow down decision-making processes and reduce overall productivity​​​​.

Increased IT Costs

Managing and rectifying issues caused by shadow IT can be costly. Organisations may need to invest significant resources to integrate shadow systems into the official IT framework or to clean up after data breaches. Duplicative and redundant IT resources can also lead to overspending​​​​.

Compliance Challenges

Shadow IT often exists outside the purview of regulatory compliance frameworks. This can lead to non-compliance with industry regulations such as the General Data Protection Regulation (GDPR) and the Data Protection Act 2018, resulting in fines, legal penalties, and damage to the organisation’s reputation. Ensuring that all data complies with relevant regulations is crucial for avoiding these risks​​​​.

How Can Businesses Mitigate Shadow IT Risks?

Mitigating the risks associated with shadow IT requires a multifaceted approach. Here are some effective strategies businesses can implement:

  • Conduct regular audits and continually monitor IT systems to help identify unsanctioned applications and devices and bring shadow IT resources into compliance with corporate policies and security standards. Tools that offer visibility into network activity and data usage can be crucial in detecting shadow IT.

  • Train employees about the potential dangers of using unauthorised tools, the importance of data security, and the proper procedures for requesting new IT resources.

  • Develop, enforce and regularly update a shadow IT policy with clear guidelines on the acceptable use of technology within the organisation. It should outline, the procedure for requesting new tools, the criteria for evaluating new tools and the consequences of non-compliance.

  • Provide a list of approved tools that meet the needs of your organisation to reduce the temptation to employees resorting to shadow IT. Consult with departments to understand any tool gaps.

  • Use advanced solutions to manage and mitigate shadow IT risks, such as Schematiq, which offers features that allow you to, automate the detection and management of shadow IT, centralise data access, improve auditability and have better control and visibility over IT resources.

These tools can automate the detection and management of shadow IT, reducing the burden on IT departments.

Secure Your Business from Shadow IT Risks Today

Discover how Schematiq's innovative solutions can protect your data, ensure compliance, and streamline your IT processes. Take control and transform your digital landscape now. Discover more about Schematiq here.


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