Artificial intelligence tools are quickly becoming part of everyday work, helping employees draft emails, summarize documents, analyze information, and automate routine tasks. “Shadow AI” occurs when employees use AI applications without the company’s knowledge, approval, or oversight. It is similar to shadow IT, but the risks can be greater because employees may unknowingly enter confidential information into external platforms.
For venture capital and private equity firms, that information could include deal materials, investment memos, portfolio-company financials, cap tables, LP information, legal documents, or other sensitive data. Once information is submitted to an unapproved AI service, the firm may have limited control over how it is stored, processed, or retained. Shadow AI can also create compliance, privacy, intellectual-property, and cybersecurity concerns. In addition, AI-generated output may be incomplete or inaccurate, making human review essential.
The goal should not be to prohibit AI entirely. Employees often turn to unapproved tools because they see a genuine opportunity to work more efficiently. Businesses should instead provide clear rules, powerful approved tools, appropriate security controls, and practical training. Use this checklist to review your company’s AI readiness:
Provide strong firm-managed AI tools and train employees on their use and best practices
- Identify which AI tools employees are currently using.
- Create a list of approved and prohibited AI applications.
- Define what information may never be entered into a public AI tool.
- Prohibit the submission of confidential deal, LP, financial, legal, and portfolio-company information without authorization.
- Configure access, data-loss prevention, retention, and logging controls where available.
- Review AI vendors for security, privacy, contractual, and regulatory risks.
- Require employees to verify AI-generated facts, calculations, summaries, and recommendations.
- Train employees on safe AI use and provide a clear process for requesting new tools.
- Review the policy and approved-tool list regularly as the technology evolves.
AI can deliver significant value, but only when it is adopted thoughtfully. Hybridge can help your organization understand how AI is being used, develop an actionable policy, evaluate appropriate tools, and put the necessary technical safeguards in place.
Reach out to us at support at hybridge.com—we are here to help.
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