Shadow AI – Why HR Must Lead Not Lag!

Image credit/Canva Alt-txt: Person coding on multiple computer screens in a modern office setting.

As custodians of Trust, People Data, and Culture, HR must be the function that is most alert to the Shadow AI vulnerability and must therefore not leave this unmanaged.

As an HR leader, you cannot afford to “sit out” GenAI simply because it carries risks. One such risk is Shadow AI and according to recent data, it is already here, posing serious threats to your organisation’s future.

For many companies, data is their most valuable asset and shadow AI could put it at risk. Assuming this is solely the responsibility of your IT department may lead to inaction on your part, further increasing your organisation’s exposure to risk.

Whether or not you are aware of it, Gen-AI is most likely already being used in your organisation - not only through authorised systems rolled out by your IT colleagues, but also through unmonitored tools adopted quietly, without IT oversight or governance.

While this is a threat to your organisation, it’s also an opportunity for CHROs and CPOs to step up as strategic partners to the CEO by helping to establish guardrails, shaping fair & inclusive AI use, while ensuring the organisation remains both innovative and safe.

What is Shadow AI ?

Simply put, Shadow AI is the unsanctioned use of AI solutions in your organisation. Many employees are already using Gen AI tools without IT’s knowledge or governance. And while their intentions may be positive, for instance using AI for efficiency or translation purposes, without oversight, they expose the organisation to risks including security breaches and  data leakage, to name just two.

 The Risks of Shadow AI include:

• Data leakage – Where PIIs and/or other sensitive data (including company IP) is shared with public AI models

• Compliance Risks – Potential breaches of GDPR, employment and confidentiality law

• Bias amplification – Unvetted models influencing recruitment or performance management decisions. If the model has been trained on biased data, then such decisions can reinforce historical and current inequalities and stereotypes

• Security Vulnerabilities - Bypassing IT governance leaves back doors open

• Loss of trust – The use of stealth AI could contribute to employees losing confidence in management and other organisational decisions. This at a time when a recent UK YouGov poll (19 August 2025), found data privacy (65%) and accuracy or reliability (57%) top the list of public concerns about AI.

 Why HR Leaders Should Care

Research from Microsoft and LinkedIn (2024 Work Trend Index) shows that at least 75% of global knowledge workers are already using generative AI platforms.

This means:

• Sensitive data may be leaving your organisation as employees (often unknowingly), share information on public models without their managers, IT or HR oversight

• Governance gaps exist between IT (the how of tech) and HR (the who of people) leaving organisations vulnerable

• Every employee from assistant to executive, could be a potential point of risk

 The unintended consequences include:

• Loss of trust

• Loss of IP or (company) sensitive information

• Reputational damage

• Customer privacy violations

• Regulatory oversight and fines

 How CHROs/HR leaders can respond

1.    Manage Access

• Draft clear guidelines for employees

• Work closely with your CEO, CAIO, CTO and others on the executive bench to decide on firewalls and approved tools

 2.    Communicate Policies

• Clarify what data staff can/cannot share on these public platforms.

• Sharing acceptable and non-acceptable use cases would also be very helpful

 3.    Build a Culture of Continuous Learning, Especially AI Literacy

• Collaborate with your colleagues in IT, L&D, and external domain experts to design training on responsible AI use

• Provide step-by-step resources through your L&D portals

• Embed AI Literacy into on-boarding and offer regular refreshers to existing staff

Conclusion

• GenAI is here to stay and while adoption in the real world may not be as rapid as once predicted, research shows a large proportion of the “knowledge workforce” is already using these tools in one form or another

• This, at a time when many organisations are walking a tightrope; figuring out which AI systems and usage to permit or restrict in order to support their workforce while balancing this with keeping the company safe

• So, whether or not you as HR leader is or isn’t aware of it, employees are already experimenting/using generative AI tools in the “shadows” with or without formal approval, with some unintentionally sharing their private and intimate chats publicly at the click of a button, often unaware that by doing so, they are also sharing their most intimate GenAI conversations with the internet and not just themselves or their intended friend(s)

• As custodians of trust, people data, and culture, HR must be the function that is most alert to the Shadow AI vulnerability and must therefore not leave this unmanaged. Another reason why HR leaders must claim their seat as AI strategic partners to the CEO

• While every organisation has different needs and/or goals, leaving employees to decide for themselves what is or isn’t acceptable Gen AI use in the office is too big a risk. In other words, trusting ALL employees to do the right thing, without any guidance is leaving the organisation at users’ mercy, each and every time they use GenAI

Now is the moment for you, as HR leader to claim your seat at the executive table as an AI strategic partner. It is the moment for you to lead, not lag, by working closely with your CEO and CTO to mitigate the risk(s) of both shadow and sanctioned AI.

 *******************************

As AI continues to advance, it is important for CHROs to embrace their role and position themselves as strategic AI partners to CEOs and the executive bench.

This is more important than being passive observers of AI development, deployment, and adoption, within organisations.

 The Importance of a Strategic Partnership

·         AI will increasingly impact various HR functions, such as Talent Acquisition, Employee Engagement, and Learning and Development.  

By proactively engaging with AI, CHROs can help shape its application in ways that benefit both employees and the organisation.

·          AI provides opportunities for HR departments to streamline processes, reduce bias, and enhance decision-making through data-driven insights.

·         This allows HR departments to focus more on strategic, high-value tasks that require a human touch, like employee relations, leadership development, and cultural initiatives.

By collaborating with internal IT teams or external experts, CHROs need to understand AI's capabilities and limitations to identify potential applications and mitigate risks. Watch video above to learn how CHROs can position themselves as strategic (AI) partners to the CEO and executive bench.

Subscribe below to receive an alert as soon as I publish new editions of my LinkedIn newsletters or, to read previous editions:

1.   Responsible AI - (this one) Putting People and Culture at the heart of AI Strategy

2.   Inclusive Leadership in the era of AI

3.   Leading with Emotional Intelligence (EQ)

If you’d like to learn more about embedding AI Literacy and Responsible AI in your organisation, then please free to contact me here on LinkedIn or, visit ExecutiveGlobalCoaching.com to learn more about how we work