According to Statista, global data storage is expected to exceed 600 zettabytes in 2030. One zettabyte equals a billion terabytes. That’s an almost unimaginable amount of information moving through networks, cloud platforms, and workplace tools every day.
And inside all that data sits a growing risk many businesses don’t even realize they have: shadow data.
At Wedgwood Insurance, we work with organizations across Newfoundland and Labrador to help them understand evolving cyber risks and ensure they have the right protection in place, not just for obvious threats, but for the hidden ones too.
What Is Shadow Data?
Shadow data is information that’s created, stored, or shared in systems that aren’t fully monitored or controlled by your organization.
It often happens through shadow IT, when employees use non-approved apps or tools for work tasks. Most of the time, people aren’t being careless. They’re trying to solve a problem quickly, boost productivity, or find an easier workaround. But these tools can create blind spots.
Shadow data may exist in:
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Unapproved cloud storage apps
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Personal devices connected to company networks
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Collaboration tools outside IT oversight
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Internet of Things devices
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Generative AI systems like ChatGPT
And once that data is outside your security perimeter, it becomes much harder to track and protect.
A Realistic Shadow Data Example
Imagine an employee downloads a third-party presentation tool to build slides for an internal meeting.
They upload sensitive company information, maybe financial details, internal plans, or client data. The app automatically saves backup files in an unfamiliar cloud location or a hidden folder on your network.
Because it isn’t part of your approved systems, that data isn’t being scanned, encrypted, or monitored.
A few weeks later, cybercriminals breach your network. They recognize the rogue app and know exactly where its backup files are stored.
They extract the data and demand a ransom.
That’s how shadow data turns into a serious cybersecurity exposure, fast.
Why Shadow Data Cybersecurity Risks Are Rising
The explosion of data across modern workplaces makes it harder than ever to safeguard information.
IBM’s Cost of a Data Breach Report 2024 found that 35% of all breaches involved shadow data, and those breaches were more expensive and harder to contain.
Shadow data theft is especially challenging across mixed environments like:
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Public cloud
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Private cloud
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On-premises systems
And now, there’s a new layer making things even more complicated: AI.
Shadow AI, The New Cybersecurity Blind Spot
IBM’s Cost of a Data Breach Report 2025 reported that 20% of cyberattacks involved shadow AI.
Generative AI tools are becoming part of everyday workflows. Employees may use them to:
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Draft reports
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Analyze data
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Write code
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Summarize documents
But AI systems still rely on data storage, and if they’re being used outside approved policies, they can quietly create major risk.
IBM found that businesses with high levels of shadow AI added $670,000 to the average breach cost compared to organizations with low or no shadow AI exposure.
Shadow AI breaches compromised:
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Personally identifiable information (65%)
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Intellectual property (40%)
One unmonitored AI tool can open the door to widespread exposure.
An AI Liability Scenario
Picture this.
Your executive team uploads a confidential quarterly strategy document into an AI tool to generate a one-page anonymous summary.
The summary looks fine. No names appear.
But the original document is stored in the AI system’s training repository, unsecured and unmonitored.
Now the organization may be violating privacy laws, exposing sensitive financial information, and increasing liability.
If hackers breach the system later, they can steal trade secrets, employee details, and client information, then use it for spear-phishing or fraud.
That’s not just a tech issue. It’s a business risk.
And it’s exactly why cyber insurance has become so critical.
How Businesses Can Reduce Shadow Data Exposure
Shadow data can’t be eliminated overnight, but it can be managed with strong governance and cybersecurity discipline.
Some key steps include:
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Set clear policies around approved and non-approved applications
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Run regular audits to uncover unauthorized tools
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Build an AI oversight plan, including which tools are allowed
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Train employees on the risks of shadow IT and shadow AI
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Implement systems that discover and protect unmanaged data
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Involve IT teams early when new tools are introduced
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Back up critical information regularly
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Stay current on evolving best practices, including NSA AI security guidance
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Use privacy tools to identify sensitive data stored across networks
Zero-trust architecture also plays a role, treating all traffic as potentially risky.
How Wedgwood Insurance Supports Cyber Risk Management
Cybersecurity isn’t only an IT concern anymore. It’s an operational, financial, and reputational one. At Wedgwood, we help businesses across Newfoundland and Labrador understand their cyber exposures, including risks tied to shadow data and emerging AI tools.
Cyber insurance can help support your organization with coverage related to:
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Data breaches and ransomware
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Business interruption
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Liability and regulatory costs
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Incident response and recovery services
The goal isn’t fear. It’s preparedness.
Summary
Shadow data cybersecurity risks are growing as businesses store more information, adopt more cloud tools, and integrate AI into daily operations. Keeping data “out of the shadows” requires clear policies, strong oversight, and the right protection in place.
If your business is using new technologies, AI tools, or cloud platforms, it may be time to review your cyber risk strategy. Wedgwood is here to help you stay protected, informed, and ready for what’s next. Want to talk about cyber insurance coverage for your business? Reach out to our team for a complimentary consultation.
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Wedgwood Insurance has offices in St. John’s & Corner Brook and is Newfoundland & Labrador’s largest independent insurance broker. We provide straightforward home, auto & business insurance advice.
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