What Are Shadow IT Risks and How to Reduce Them

Shadow IT may be a new term, but it represents one of the biggest cybersecurity issues organizations face. SaaS applications are becoming popular, allowing employees to access unauthorized apps via a work computer browser. Employers and IT admins are finding it difficult to restrict access to apps that are not tested or approved by the organization’s IT department. Anywhere from 42% to 80% of employees are using shadow IT tools every day at their workplace. This presents serious security risks to both the company and its customers.

In this article, we explore what shadow IT is, the risks associated with it, and what organizations can do to prevent security breaches as a result.

What is a Shadow IT Risk?

Shadow IT risks are all the potential issues presented by employees using software solutions that are not vetted by the organization’s IT department.

In most organizations, digital workplace tools are verified and purchased through the IT department. If employees need a new solution, they place a request with IT, which will in turn acquire it for them. In a shadow IT scenario, employees obtain the software by themselves for their own use on a company workstation.

Shadow IT can be as simple as someone using Canva for designing a couple of posters. But it can also be as complex as someone using a third-party AI solution to analyze patient data.

Shadow IT may arise for multiple reasons. It could be that the organization has deemed its cybersecurity risks to be low and has given employees the liberty to use the tools they need. Or it could be that the available tools aren’t suitable, but the IT department takes too long to process requests for new software solution.

Regardless of why shadow IT occurs, it presents multiple risks to the organization.

When Is Shadow IT a Problem?

From a security standpoint, shadow IT always poses a problem. Anytime employees use software solutions on their own without requesting from the IT department or following approved steps to acquire the tool, the organization becomes vulnerable to data security risks.

What Are Shadow IT Risks?

Shadow IT risks fall into the category of the ‘unknown.’ Even tools vetted and approved by the organization will have vulnerabilities and security risks. But the organization is aware of them, and those potential issues fall under its risk management policies.

In the case of shadow IT tools, the organization is not aware of the potential risks (which is in itself a risk). Even if it appears to be safe and comes from a reputable vendor, without visibility, the organization’s cybersecurity team cannot evaluate any potential impacts. And that, after all, is a core function of their role. Besides the obvious cybersecurity risk, shadow IT risks include non-compliance issues from regulatory bodies which can lead to financial and other penalties, something we explore later in this article.

How to Respond

Once you have identified that there is shadow IT within your organization (and there likely is right now), the next step is to decide how to respond. While an obvious solution, outright banning the non-approved tools may not be the best option.

To reduce shadow IT, you first need to understand why employees are resorting to it. That involves exploring the IT acquisition processes in your organization and getting feedback from employees.

Reducing Shadow IT needs

One of the major reasons for shadow IT is that employees are not satisfied with the tools that the organization has provided. It could be that the available tools are not fit for the job or that other tools perform better. It could also be that the user of shadow IT is more comfortable with other tools and doesn’t want to spend the time and effort learning something new.

A major—and straightforward—step organizations can take to reduce shadow IT is by gathering employee ideas, suggestions, and feedback when choosing workplace tools. They can also work to streamline the acquisition process for new tools.

Establishing Shadow IT Policies

Just as a small leak in a dam can quickly become a torrent. So too can shadow IT quickly escalate into serious security concerns in an organization. Without clear and consistent policies, shadow IT can become the de facto practice for the company’s employees. Soon the entire workforce may be using tools of their own preference and the company’s data may be split across many solutions and third party vendors. And the technical challenges compound as it becomes more difficult to move this data to a unified platform.

Well-established organizational policies help mitigate shadow IT risks. Organizations can mandate that employees use only the solutions vetted and approved by the IT department.

Additionally, companies can decentralize the approval process for new tools and software to reduce shadow IT risks. It may also be worth exploring how to improve and streamline the software acquisition process to encourage employees to have new applications vetted prior to implementation.

Establishing Shadow IT Policies

Shadow IT should be cause for concern for organizations particularly if they’re dealing with consumer data.

It won’t take much time for shadow IT to become the de-facto practice for the company’s employees. Soon the entire workforce may be using tools of their own preference and the company’s data may be split across many solutions and third parties. And the technical debt accrues making it more difficult to move this data to a unified platform.

Lack of IT Control

Besides introducing cybersecurity risks, shadow IT creates a lack of IT control over an organization’s assets. It becomes difficult to keep track of who is using what and where assets are located. Without this control, the company will struggle when it is time to plan future IT initiatives and programs.

Data Loss and Data Leaks

When a solution is properly evaluated and brought under the organization’s asset management strategy, the risks associated with it are understood and managed. But when an employee stores an organization’s data on an unvetted tool, odds are they haven’t evaluated the solution’s privacy and data use policies. If the vendor stops offering the solution, or if they face a data leak, the organization may remain unaware of it. This creates unknown risks to the organization’s data.

Unpatched Vulnerabilities and Errors

When software is outdated or hasn’t received the latest security patches it's vulnerable to cybersecurity threats. When it is managed by the organization’s IT, all software is updated with security patches. Without regular support or updates, shadow IT tools are bound to have unpatched vulnerabilities which bad actors may exploit. And it may have errors or bugs which can affect the output

Compliance Issues

Many industries have strict regulations on how to handle data—particularly if they’re handling customer data.

For example, in health-tech, HIPAA rules dictate who is allowed to handle patient data, and where and how it can be stored. And every tool or software that these companies use to handle patient data is verified to be compliant with industry regulations. By using shadow IT, employees are exposing patient data to systems that may not be HIPAA compliant.

Financial Risks

On a more mundane level, software used in shadow IT may need licenses for enterprise use. Ignoring that requirement puts the company at further legal and financial risks. Savvy software vendors are proactive about who is using their software and how and may pursue action in the case of misuse or misrepresentation.

Risks of Shadow IT

Shadow IT presents a lot of risks to the organization. Here are a few of them.

Visibility and Control

Organizations need complete transparency of their assets to make good decisions. In fact, many organizations are currently struggling with data silos imposed by the different systems being used. Without visibility and control, it is difficult for them to pursue digital transformation.

Attack Surface Expansion

When employees are using tools of their own choice without getting them verified or tested by the IT department, they’re putting a larger target on the organization. Every new tool introduced by the employees presents its own list of vulnerabilities and without properly analyzing the risk, they risk expanding the attack surface for bad actors.

System Inefficiencies

If the organization is familiar with the different tools they are using, they can optimize the workflow accordingly. Part of their purview is finding solutions that work along with the rest of their systems. With shadow IT, workflow will be suboptimal and can lead to overall inefficiencies.

How to reduce shadow IT risks

Here are key takeaways as you work to reduce shadow IT in your organization.

Build a Flexible Corporate Policy

A flexible corporate policy allows employees to demand the tools they need and get them quickly. It empowers employees to use the best tools for the job without compromising the safety of the organization. A flexible corporate policy makes use of the power of shadow IT instead of letting it compromise the organization.

Educate Your Employees on Shadow IT

Make your employees aware of the risks of shadow IT and how it can affect the company. Make sure they know how to properly request a new solution. And make them part of the decision-making process when purchasing new tools.

Give Your Employees the Tools They Need

While obvious, one of the main reasons employees resort to shadow IT is because they are simply not satisfied with the solutions they have. Making sure that they have the tools they need, and consistently checking in to see if they’re satisfied will help organizations reduce their shadow IT use.

Keep an Eye on the Cloud

When organizations move their operations to the cloud, it can change how shadow IT works within your organizations. Employees could rely on more shadow SaaS solutions, but the move to the cloud can also reduce their dependence on overall shadow IT.