4 Business Risks Associated with Shadow IT You Should Know

Posted by Sayali Kekre on August 20 2015

Shadow IT is the use of any application or IT resource obtained or built by business users without the knowledge or approval of their IT department. It is becoming a pervasive problem resulting in not only the huge cost endurances for the company but also serious threats of data leakage, security and compliance risks. The proliferation of shadow IT in enterprises has significantly increased over last few years because of freely available cloud services (like Dropbox) and mobile applications.


Here are 4 critical risks associated with shadow IT that you should be aware of:

  1.     Data Leakage: - Data leakage poses a serious problem for organizations as the number of incidents and associated financial loss continue to grow significantly. Over the last few years, companies across industry verticals around the world have experienced their sensitive data being lost, stolen or leaked to the outside world. Some of the incidents were caused by external threats (hackers) while majority of them were because of employees. Shadow IT is one of the main reasons for inadvertent data loss because of the use of things like consumer file sharing by employees as against the IT-driven enterprise file sync & share (EFSS), where IT can control the use of sensitive data while giving end-users flexibility of file sharing.
  1.     Regulatory Compliance: - Sidestepping enterprise IT to use cloud services can also leave an organization in violation of regulatory compliance requirements – particularly in Banking, Insurance and Financial Services (BFSI) industry. May regulations require that the data needs to be restricted to within the corporate network and only on the devices that are IT managed (or even Bring-your-own-device (BYOD) devices but through implementation of solutions like enterprise mobility management (EMM)). Compliances also mandate the use of data classification through content-aware data loss prevention (DLP) and enterprise rights management (aka enterprise digital rights management or eDRM) to ensure that the data is accessible only to authorized users and stay under corporate IT control even after it is shared with third-party. Hence enterprise digital rights management plays an important role in ensuring compliance, which could otherwise be a business risk.
  1.     Data Sovereignty / Data Residency: - In regions with tight data sovereignty regulations, such as the European Union, data is not permitted in third-party clouds unless it’s encrypted, and the encryption keys aren’t allowed to leave the jurisdiction. This means that most of the consumer file sharing solutions are not even legal.
  1.     Licensing Compliance: - When software licenses are purchased outside the IT department's knowledge or purview, those licenses aren't managed within the organization's central software management program. This leads to potential licensing compliance complications. If improperly licensed software is discovered, an organization can be subjected to an audit – resulting in severe penalty and loss of reputation.

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Topics: Digital Rights Management (DRM), Compliance, Enterprise Mobility Management, enterprise file security, Shadow-IT

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