Artificial Intelligence (AI) is ubiquitous, with businesses across all sectors leveraging it to streamline operations, automate tasks, and enhance customer interactions. However, despite its widespread use, experts caution that AI still has limitations in critical areas. Understanding these limitations is crucial to avoid over-relying on technology.

“Artificial intelligence is just a new tool, one that can be used for good and for bad purposes and one that comes with new dangers and downsides as well.” — Sarah Jeong, Information and Technology Journalist

While AI, with its powerful data analytics and pattern recognition capabilities, is hailed as a game-changer, it is essential to recognize its limitations. Here are three situations where companies should be cautious in using AI:

When Expertise is Needed

Despite its name, AI lacks true intelligence. It doesn’t use deductive reasoning but instead analyzes vast amounts of data to identify patterns and make predictions. This means AI’s accuracy depends on the quality of the data it processes. Human cognitive biases can also be unintentionally embedded in AI systems due to their developers.

AI can generate reports and analyze information, but its outputs shouldn’t be taken at face value. Expert judgment is crucial in decision-making, especially in areas like accounting and tax preparation. AI might apply outdated or incorrect rules, leading to significant issues. Other fields where AI can falter include HR (where biases have been identified), legal matters (where AI has generated false case histories), and any scenario where your company’s reputation is on the line, such as crisis communication.

When Handling Confidential Data

AI tools, especially those based on large language models (LLMs), are often publicly accessible. This raises concerns about data privacy, as there’s no absolute guarantee that information processed by these tools won’t be exposed. It’s vital to avoid sharing confidential or proprietary information with external AI systems. Even when AI tools are integrated with an organization’s security measures, prioritizing confidentiality is key to preventing sensitive data from becoming public. It’s better to be safe than sorry.

When Decisions Involve Ethics or Context

AI lacks the ability to consider emotions or ethical implications, making it unsuitable for decisions requiring moral judgment. For instance, asking AI about retrenching staff might result in recommendations focused solely on cost savings, disregarding the impact on human lives. A notable incident involved a healthcare chatbot, designed to assist doctors, which suggested a fake patient should commit suicide. While AI can reduce workloads, such instances highlight the importance of human oversight.

The Bottom Line

AI is a promising technology but not a one-size-fits-all solution. There are significant areas where businesses should proceed with caution, particularly in accounting and tax matters.