If you think your business hasn’t started using AI yet, look again — your staff probably have. It’s called shadow AI: employees using unsanctioned AI tools, usually free ChatGPT-style accounts, to get work done without IT knowing. A Forbes analysis this week ranked shadow AI as the third most common non-malicious insider action in data-breach investigations, with frequent employee AI use jumping from 15% to 45% in a single year. Closer to home, SAP’s Value of AI Report found only 22% of Australian organisations feel ready to govern AI, while 77% admit shadow AI is already happening.

Here’s the pattern we see constantly across Australian client environments: the risk almost never comes from the Copilot licence you paid for. It’s the free, personal-account tools that never touch your security stack — someone pasting a client list into ChatGPT to draft an email, uploading a spreadsheet of donor or patient records into an online ‘AI summariser’, or adding a browser extension that quietly ships screen content to a model you’ve never vetted. For an accounting firm on the Northern Beaches or a not-for-profit in Orange, that’s client financials and personal information leaving the country — and under the Privacy Act, it’s still your breach to report.

You don’t fix this by banning AI — ban it and staff just hide it better. Give them a sanctioned option instead: a business-grade tool like Microsoft 365 Copilot, where your data isn’t used to train public models. Then write a one-page acceptable-use policy spelling out, in plain English, what can and can’t go into a prompt. Turn on data loss prevention in Microsoft 365, check which AI browser extensions are on company machines, and spend five minutes on AI safety at your next team meeting. Visibility beats prohibition every time.

Not sure what your team is already pasting into which tools? That’s exactly the gap worth closing. All IT Services can audit your AI exposure, roll out a governed tool your people will actually use, and tighten the security controls around it. Talk to us before shadow AI becomes a notifiable one.