Blog Article

Hallucination Risks for Enterprises Building AI Applications

Arnav Bathla

8 min read

As enterprises increasingly deploy LLMs in their operations, understanding the nuances of these technologies is critical, particularly when launching new general AI applications. One of the less-discussed yet critical aspects of LLMs is the phenomenon of hallucination, where the model generates inaccurate or fabricated information. This poses not only a risk of misinformation but also significant security vulnerabilities in output handling. This blog explores the concept of hallucination in LLMs, highlights the security risks, and introduces 'Layerup'—a solution to ensure the security and reliability of enterprise AI applications.

What is Hallucination in LLMs?

Hallucination in the context of LLMs refers to instances where the model generates output that is not grounded in reality or factual accuracy. This can range from minor inaccuracies to completely fabricated statements or data. The reasons behind such behaviour include biases in training data, overfitting, and the inherent limitations in the model's understanding of context or reality.

Implications of Hallucination

The implications of hallucinations are profound, especially when these models are trusted for generating content in sensitive areas like medical advice, financial information, or legal assistance. Misinformation can lead to incorrect decisions, misjudgments, and potentially hazardous outcomes.

Hallucination Leading to Insecure Output Handling

One less obvious but equally dangerous implication of hallucination is its contribution to insecure output handling within software systems.

What is Insecure Output Handling?

Insecure Output Handling refers to insufficient validation, sanitization, and handling of the outputs generated by LLMs before they are passed downstream to other components and systems. Since the content generated by an LLM can be manipulated through its prompts, this indirectly gives users access to functionalities that might not be intended for public use.

Differences from Overreliance

Unlike overreliance on LLMs, which deals with a broad dependency on their outputs, insecure output handling focuses on the immediate security vulnerabilities introduced when these outputs interact with other system components.

Conditions Increasing Vulnerability Impact:
  • Granting LLMs excessive privileges within applications.

  • Applications vulnerable to indirect prompt injection attacks.

  • Inadequate validation of inputs by third-party plugins.

Common Examples of Vulnerability
  • Direct execution of LLM outputs in system shells leading to remote code execution.

  • Execution of unsanitized JavaScript or Markdown, interpreted by browsers, resulting in XSS.

How to Prevent Insecure Output Handling
  • Adopt a zero-trust approach and treat the model as any other user, ensuring strict input validation on responses.

  • Have appropriate observability and guardrails in place. You can ping us at Layerup to help you with the same.

Example Attack Scenarios
  • An administrative plugin for a chatbot fails due to unsanitized responses from a general-purpose LLM.

  • A website summarizer tool causes sensitive data leakage through a prompt injection that instructs the LLM to encode and send data to an attacker-controlled server.

  • SQL queries crafted by users through an LLM chat feature leading to database deletion if not properly validated.


The integration of LLMs into digital services and products must be managed with a thorough understanding of both their capabilities and limitations. As these models become more pervasive, ensuring the security of their implementation is paramount. Understanding hallucination and its impact on insecure output handling is crucial for developing robust, secure applications.

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