AI Policy Considerations for Real Estate and Construction Companies
Artificial Intelligence (AI) is quickly becoming a valuable tool across the real estate and construction industry. Many accounting departments have been using artificial intelligence to create cost-to-complete estimates, change order analyses, and budget vs. actual analytics. While AI has proven to be an effective tool to improve efficiency, there are also some new challenges that may arise with its ever-increasing use. This is why it is crucial to have a clear, practical policy in place at your organization to maximize the benefits and mitigate the risks of AI If you decide to construct an AI policy for your company, here are a few key points for consideration.
Definition of the Objective, Acceptable Uses, and Users of Artificial Intelligence
A strong AI policy should clearly define the purpose of its use. This ensures that employees know that AI is to be used for purposes related to their roles. The policy should also delineate who should have access to AI tools, in case a distinction needs to be made between employees and contractors. Your AI policy should make a clear distinction between what uses of artificial intelligence are allowed and prohibited. For example, permissible uses of AI could include tasks such as summarizing project cost reports, assisting with budget-to-actual variance analyses, and researching accounting guidance. Examples of AI practices that should be prohibited include uses such as the development or finalization of cost-to-complete estimates without management’s review and uploading sensitive project bids or proprietary development assumptions into non-approved tools.
Security and Confidentiality of Data Inputs
We recommend that your AI policy specify that sensitive inputs should only be entered into company-approved AI platforms. Real estate and construction companies manage highly sensitive information, including project bids, subcontractor pricing, and tenant data. Many AI systems incorporate machine learning, and inputting this sensitive data into such systems may expose this information to identify thieves and other malefactors. Your policy should restrict the use of AI tools to company-approved platforms, prohibit the entry of sensitive data into public AI systems, and require appropriate data security safeguards.
Human Review
AI can assist with analysis but should never replace human judgment. This is especially the case in areas requiring estimates and assumptions such as fair value estimates, impairment analyses, and cost-to-complete estimates. AI is a powerful tool, and its output quality has advanced year-by-year. However, as with human judgement, artificial intelligence is not 100% safe from errors. Your policy should clarify that, while AI is permissible as a tool, its output must be independently reviewed, final responsibility for its output rests with management, and that documentation of review procedures is required.
Incident Response Planning
Incident response planning is also recommended in an AI policy. There may be situations where things go awry. Such planning should outline what procedures should be performed in the event of a data breach or an unauthorized user gaining access. Procedures can include establishing reporting procedures for potential incidents, setting a chain of command with roles and responsibilities for crisis response, and implementing steps to investigate and remediate issues.
Documentation of Use
If your financial statements are regularly assessed by external or internal auditors, it is recommended that your AI policy mandates the documentation and monitoring of its usage. Your AI policy should require users to keep track of their AI usage as well as be able to provide evidence of human-level review. This is particularly important in environments where financial information is relied upon by lenders and investors. It is also critical in demonstrating appropriate oversight of automated controls to your auditors.
Closing Thoughts
Artificial Intelligence offers significant opportunities for real estate and construction companies to improve efficiency and enhance decision-making. This list of AI policy guidelines, while not exhaustive, provides a firm bedrock to a policy for the uses of artificial intelligence. Consider using these points to steer your company confidently yet safely through this age of rapid technological change. If you would like assistance developing or refining an AI policy tailored to your company, please reach out to your Keiter Opportunity Advisor.| Call: 804.747.0000 |Email
About the Author
Dylan Smith
Business Assurance and Advisory Services, Senior Associate
Dylan Smith is a Senior Associate in Keiter’s Business and Advisory Services department. He is focused on delivering value added services to his clients by understanding their unique organizational missions and providing tailored engagement services. Dylan is a member of Keiter’s Real Estate & Construction team.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
