• AI agents deliver efficiency across the value chain — from contract review and tenant services to construction planning and payment management, agentic AI can streamline operations, reduce errors, and cut costs.
• Your firm should implement oversight, ethical safeguards, and security protocols to responsibly adopt autonomous systems.
• If you adopt early, you gain a competitive edge, as organizations that act now to pilot agentic AI use cases will position themselves ahead of competitors still relying on traditional processes.

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Real estate and construction companies are on the precipice of a dramatic shift. Artificial intelligence (AI), particularly agentic AI, will permanently change how the industry does business, streamlining functions from back-office administration to logistics, data-heavy tasks, and more.

Unlike traditional automation, intelligent agents are purpose-built and trained to fulfill specific roles, enabling them to make decisions independently and navigate complex processes with minimal human intervention. Organizations that successfully integrate these tools stand to benefit from faster decision making, improved project planning, and more competitive pricing.

For all its benefits, autonomous AI represents an intimidating advancement. These systems require robust support infrastructure and bring new risks and challenges. Organizations will need to strengthen their data governance processes, implement cybersecurity best practices, learn how to collaborate with autonomous systems, and account for novel risks like AI bias on an ongoing basis.

These complex dynamics call for thoughtful planning and targeted investments without delay. As first steps to integration, real estate and construction companies should proactively investigate how agentic AI can improve their operations and seek out potential use cases. Organizations that act quickly will unlock a powerful competitive differentiator, while those who wait risk being left behind.

Agentic AI Real Estate and Construction Use Cases

Companies are just beginning to understand the vast potential of AI agents. For real estate and construction leaders seeking an entry point, several use cases stand out as impactful and achievable options, each carrying the potential to increase efficiency and reduce operational overhead.

Real Estate Use Cases

Contracts and pricing: Property management firms are responsible for maintaining and understanding large troves of documentation. AI can quickly sift through huge amounts of data, easing the process of reviewing and drafting key documents. These tools will help verify that contractual clauses are written correctly and do not contain any oversights. They can also monitor regulatory activity and notify businesses in real time about any changes, new rules, and potential compliance issues. With appropriate oversight, they will even be able to make the necessary adjustments in some cases. 

During negotiations, firms could call upon their AI agents to screen tenant applications and leverage historical and current market data. Property managers could come to the table confident that their pricing decisions are defensible and backed by data, tailored to both meet their needs and satisfy applicants’ expectations.

Tenant management and customer service: Intelligent systems can offer around-the-clock support for maintenance or information requests. Previously, if a tenant experienced a non-emergency issue with an appliance during the night, they might need to wait until the following day to notify their management company and schedule repairs. Autonomous agents can respond immediately, no matter the time, and place a service request on the schedule for the following morning. Prompt responses will help reassure tenants they are being heard, reducing instances of friction and building loyalty. Should an emergency arise, the system can immediately notify the management company and update the maintenance schedule accordingly.

Back-office support: AI will transform the back office, processing and validating payments automatically and sending reminders to tenants or other customers who miss a deadline. With access to this financial information, intelligent tools can also help collect and organize data for financial reporting obligations and, if given the appropriate parameters, may even supplement actions such as filing taxes, cutting down on compliance costs while increasing efficiency.

Portfolio Management: Agentic AI can act as a continuous decision-making partner in investment management for both real estate and construction firms. It can autonomously monitor market dynamics, forecast project viability, and reallocate capital across portfolios in real time. It can also evaluate factors like material cost fluctuations, urban development plans, and rental yield trends to optimize asset performance without constant human oversight.

Construction Use Cases

Coordination and planning: AI agents can engage in forecasting, simulation, and planning for construction projects. They can also oversee communications with and between parties like inspectors, contractors, and subcontractors. Acting as project managers, these systems will monitor and log progress when a job is running smoothly, and step in to help course correct when necessary, independently adjusting schedules or budget forecasts based on changing circumstances. If, for example, malfunctioning machinery causes a work stoppage, an AI agent can flag the breakdown and incorporate the time needed for repairs into an updated project roadmap. With an autonomous agent managing workflows, organizations may be better insulated against human scheduling errors and resultant cost overruns.

Payment Management: Agentic AI can help construction companies manage payment applications, ensuring contractors and subcontractors are paid on time. It can also log completed work for recordkeeping and reporting purposes, keeping information standardized and accessible and reducing the chances of documentation getting lost or misclassified.

Permits and compliance: Construction projects require proper permitting and regular inspections to verify that job-site conditions are safe and compliant. Mistakes or misstatements in permitting documentation can be expensive and may increase overall compliance costs or open organizations up to enforcement actions. Intelligent agents can reduce these risks by gathering information for use in permit applications, interpreting and filling out the necessary forms, keeping track of permits filed, and updating the company in real time if permitting needs change. This function can be particularly impactful with respect to local jurisdictions, where regulations can often vary widely and can be difficult to track manually.

Agentic AI can also monitor labor union agreements and related workforce regulations, helping firms proactively align with union requirements, avoid disputes, and maintain smooth operations across all jurisdictions.

Humans in the Loop

Real estate and construction companies can pursue these applications today. As agentic AI advances, companies can integrate these systems even more deeply into operations. Think of smart buildings and autonomous construction equipment, all managed and guided by intelligent tools.

Even as AI functionality continues to evolve, one factor remains constant: Humans are essential to support both initial integration and provide ongoing oversight of new tools and technologies. Leaders must remain aware of the challenges AI can bring and treat adoption not as a one-off instance but as part of a long-term strategy.

Agentic AI Risks and Challenges

In the past, real estate and construction companies have not been as tech-forward as other industries. To support agentic AI, they will have to make up ground, particularly in areas like governance, cybersecurity, and AI literacy.

AI Bias

The risks posed by unseen biases grow substantially with AI agents. Data used to train AI is subject to the biases of the humans who provide it, sometimes causing a program to “inherit” the discriminatory biases of its creators. Inherited biases could lead to unfair or inaccurate outputs that damage the businesses that rely on them. This risk is especially prevalent for real estate firms, which may employ intelligent tools for tasks like pricing, contract negotiations, and application screening. For instance, if those systems have inherited a bias that causes them to treat applicants differently based on a protected characteristic, the firm could violate fair housing regulations, leading to significant financial, legal, and reputational risks.

Preventing AI bias demands continuous and active testing, covering both the underlying dataset and the AI’s outputs. Companies should request bias test results from any potential AI vendor, and check whether a vendor has obtained third-party certifications such as SOC 2 as an additional layer of confidence. A lack of bias testing is a red flag. The risks of harm to a business and its customers are too great to ignore. Organizations inexperienced in making these evaluations may consider enlisting a knowledgeable third party with the resources and experience to help check for unseen biases.

Governance

Strong AI governance, covering both technical concerns and operational risks, is critical for successful AI implementation. Because autonomous agents will operate cross-functionally, building a governance framework must be a cross-functional process, incorporating feedback from each area of the business and covering critical domains like risk management, data ethics, data privacy, data lifecycle management, and organizational structure.

For real estate and construction companies, the first step is assigning decision rights. Where will an AI agent be empowered to make decisions, what data will it leverage to do so, and how will human oversight be conducted? Answering these questions means defining specific use cases, such as the options above, and will allow firms to clearly delineate the AI agent’s role and assessing any risks tied to each use case. Organizations will also need a process to document decisions and deliver feedback. For domains that introduce compliance risks, such as construction site safety or tenant application screening, governance teams should implement several layers of checks to ensure that all decisions are responsible and ethical.

Governance is not just as a means for organizations to protect themselves, but also a way to unlock the full potential of their AI agents. A clear scope and well-defined decision parameters will enable safer usage, but they also create higher quality and more reliable outputs.

Cybersecurity

Interconnected systems can increase security vulnerabilities, necessitating new protections against novel forms of data theft. Real estate and construction companies will need clear visibility into AI input data, how that data is processed, who has access to it, and how it is shared to support data loss prevention (DLP) and stop sensitive data from leaking.

For organizations that employ outward-facing AI, such as agents that handle tenant inquiries, these needs are even sharper. A user interacting with an agent could ask a question that causes the system to reveal sensitive business information. Known as “prompt injection,” this tactic is increasingly used by bad actors to steal information without breaking into a company’s systems.

In some cases, strengthening cybersecurity also involves physical security. On a construction site, for instance, supervisors will likely use mobile devices or machinery that communicate with AI agents. Firms must be sure they have adequate endpoint security and a robust mobile device management strategy to track usage. If an unauthorized individual gains access, whether on purpose or by mistake, they could obtain sensitive information. These devices should only be accessed by trusted, predesignated users.

How MGO Can Help

Adopting agentic AI is not just about technology; it’s about building a sustainable framework that blends innovation with responsibility. At MGO, we help real estate and construction firms evaluate practical AI use cases, strengthen data governance, mitigate risk, and design tailored strategies for integration. Whether you are exploring tenant management automation, portfolio optimization, or construction compliance tools, our team provides you with the insights and guidance needed to move forward with confidence. By acting today, your organization can unlock efficiency, resilience, and a powerful competitive advantage in tomorrow’s market. Contact us to learn more.

Written by Tyler Cahill, Kirstie Tiernan and Kristi Gibson. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com.

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• Using AI cybersecurity tools can help you detect threats faster, reduce attacker dwell time, and improve your organization’s overall risk posture.

• Generative AI supports cybersecurity compliance by accelerating breach analysis, reporting, and regulatory disclosure readiness.

• Automating cybersecurity tasks with AI helps your business optimize resources, boost efficiency, and improve security program ROI.

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Cyber threats are evolving fast — and your organization can’t afford to fall behind. Whether you’re in healthcare, manufacturing, entertainment, or another dynamic industry, the need to protect sensitive data and maintain trust with stakeholders is critical.

With attacks growing in volume and complexity, artificial intelligence (AI) offers powerful support to help you detect threats earlier, respond faster, and stay ahead of changing compliance demands.

Why AI Is a Game-Changer in Cybersecurity

Your business is likely facing more alerts and threats than your team can manually manage. Microsoft reports that companies face over 600 million cyberattacks daily — far beyond human capacity to monitor alone.

AI tools can help by automating key aspects of your cybersecurity strategy, including:

• Real-time threat detection: With “zero-day attack detection”, machine learning identifies anomalies outside of known attack signatures to flag new threats instantly.

• Automated incident response: From triaging alerts to launching containment measures without waiting on human intervention.

• Security benchmarking: Measuring your defenses against industry standards to highlight areas for improvement.

• Privacy compliance support: Tracking data handling and reporting to meet regulatory requirements with less manual oversight.

• Vulnerability prioritization and patch management: AI can rank identified weaknesses by severity and automatically push policies to keep systems up to date.

AI doesn’t replace your team — it amplifies their ability to act with speed, precision, and foresight.

Practical AI Use Cases to Consider

Here are some ways AI is currently being used in cybersecurity and where it’s headed next:

1. Summarize Incidents and Recommend Actions

Generative AI can instantly analyze a security event and draft response recommendations. This saves time, supports disclosure obligations, and helps your team update internal policies based on real data.

2. Prioritize Security Alerts More Efficiently

AI triage tools analyze signals from across your environment to highlight which threats require urgent human attention. This allows your staff to focus where it matters most — reducing risk and alert fatigue.

3. Automate Compliance and Reporting

From HIPAA to SEC rules to state-level privacy laws, the regulatory landscape is more complex than ever. AI can help your organization map internal controls to frameworks, generate compliance reports, and summarize what needs to be disclosed — quickly and accurately.

4. Monitor Behavior and Detect Threats

AI can track user behavior, spot anomalies, and escalate suspicious actions (like phishing attempts or unauthorized access). These tools reduce attacker dwell time and flag concerns in seconds — not weeks or months.

5. The Next Frontier: Autonomous Security

The future of AI in cybersecurity includes agentic systems — tools capable of acting independently when breaches occur. For instance, if a user clicks a phishing link, AI could automatically isolate the device or suspend access.

However, this level of automation must be used carefully. Human oversight remains essential to prevent overreactions — such as wiping a laptop unnecessarily. In short, AI doesn’t replace your human cybersecurity team but augments it — automating repetitive tasks, spotting hidden threats, and enabling faster, smarter responses. As the technology matures, your governance structures must evolve alongside it.

Building a Roadmap and Proving ROI

To unlock the benefits of AI, your business needs a strong data and governance foundation. Move from defense to strategy by first assessing whether your current systems can support AI — identifying gaps in data structure, quality, and access.

Next, define clear goals and ROI metrics. For example:

• How much time does AI save in daily operations?

• How quickly are threats identified post-AI deployment?

• What are the cost savings from prevented incidents?

Begin with a pilot program using an off-the-shelf AI product. If it shows value, scale into customized prompts or embedded tooling that fits your specific business systems.

Prompt Engineering to Empower Your Team

Your teams can get better results from AI by using structured prompts. A well-designed prompt ensures your AI tools deliver clear, useful, business-ready outputs.

Example prompt:

“Summarize the Microsoft 365 event with ID ‘1234’ to brief executive leadership. Include the event description, threat level, correlated alerts, and mitigation steps — in plain language suitable for a 10-minute presentation.”

This approach supports internal decision-making, board reporting, and team communication — all essential for managing cyber risks effectively.

Don’t Wait: Make AI Part of Your Cybersecurity Strategy

AI is no longer a “nice to have”; it’s a core component of resilient, responsive cybersecurity programs. Organizations that act now and implement AI strategically will be better equipped to manage both today’s threats and tomorrow’s compliance demands.

How MGO Can Help

At MGO, we help forward-thinking companies across industries — including healthcare, life sciences, manufacturing, cannabis, technology, and entertainment — harness the power of AI to strengthen their cybersecurity posture while maintaining control, compliance, and clarity.

Our team combines deep technical knowledge with industry-specific insight to help you evaluate your current systems, identify where AI can deliver real value, and implement solutions that support long-term resilience across the board.

From building data governance frameworks to designing effective prompt strategies, we guide you step-by-step to make sure your cybersecurity investments are strategic, scalable, and aligned with your business goals — all with tailored advisory solutions in cybersecurity management, outsourced accounting, and technical compliance.

Explore how MGO can help you build a smarter, stronger cybersecurity program. Contact us today to learn more.

The post How AI Can Strengthen Your Company’s Cybersecurity appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI in manufacturing boosts efficiency, but poor data quality can lead to costly errors and flawed forecasts.

• Cyber threats grow as AI connects IT and operational technology (OT) systems. Secure your infrastructure to reduce exposure.

• AI tools risk IP leaks and job disruption. Protect proprietary data and invest in workforce upskills.

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Amid growing cost pressures and dampened sentiment, manufacturers are turning to artificial intelligence (AI) to improve visibility, decision-making, and efficiency across complex operations. According to the Q2 2025 Outlook Survey from the National Association of Manufacturers, 84.7% of manufacturers plan to prioritize digital transformation in the next 12 months — with 21.8% placing significant emphasis on these initiatives.

While 72% of manufacturers already report measurable cost savings and performance gains from AI, overall optimism has dropped to 55.4% (the lowest level since Q2 2020). With rising input costs — particularly tariffs and raw material inflation — manufacturers must adopt AI with discipline and oversight.

But with accelerated adoption comes elevated risk. Manufacturing leaders must proactively manage the challenges AI introduces to avoid exposing the business to unnecessary vulnerabilities. This includes building strong governance frameworks with human-in-the-loop oversight, so critical decisions and outputs are always validated by skilled professionals rather than left entirely to automated systems.

Top 5 AI Risks in Manufacturing (and How to Manage Them)

Here are five critical AI risks manufacturing organizations face — and strategies to manage them responsibly:

1. Poor Data Quality Can Lead to Faulty AI Outputs

Manufacturers generate massive amounts of data from internet of things (IoT) sensors, machinery, and supply chain systems. However, if this data is unstructured or inconsistent, AI algorithms may produce inaccurate or misleading insights. This can result in flawed inventory levels, distorted demand forecasts, and even safety risks due to unreliable quality control systems.

How to manage it: Invest in foundational data hygiene and governance, such as continuous metric monitoring. Standardizing, structuring, and validating data across systems before deploying AI models is critical to ensuring reliable outcomes.

2. Cybersecurity Threats Expand with AI-Driven Connectivity

As AI tools integrate with OT and IoT infrastructure, they increase the attack surface across the manufacturing environment as well as regulatory risk exposure. Legacy OT systems, often not built with security in mind, become vulnerable when connected to AI-driven IT networks.

How to manage it: Implement robust cybersecurity protocols across IT and OT systems and adopt zero-trust architecture. Prioritize threat detection, continuous monitoring, and security-by-design when deploying AI platforms.

3. Risk of Intellectual Property (IP) Exposure

AI tools often rely on proprietary data — including process flows, equipment settings, and production methodologies — to generate insights. When shared on open platforms or in unsecure environments, this sensitive information can be at risk of theft or misuse.

How to manage it: Leverage secure AI environments with limited internet exposure and implement enterprise-wide access controls and data classification protocols. Train staff on responsible data handling practices and limit AI exposure to critical IP when possible.

4. Workforce Disruption from Automation and Digital Tools

AI technologies like computer vision and digital twins are redefining job functions on the factory floor. While these tools enhance efficiency, they may also displace certain roles — such as manual inspectors — unless companies invest in reskilling initiatives.

How to manage it: Develop talent strategies that focus on digital upskilling. Align workforce planning with technology adoption and support employees through change management and training programs.

5. Operational Disruptions from AI Model Failures

Without structured oversight, AI systems can produce unexpected outputs, including “hallucinations” — inaccurate or fabricated information. In critical functions like demand forecasting, these errors can lead to overproduction, tied-up capital, or delays.

How to manage it: Establish a cross-functional AI governance model with clear testing, validation, and human-in-the-loop oversight protocols. Embed monitoring systems to continuously evaluate model performance and flag anomalies early.

How MGO Can Help: Strategic AI Risk Management for Manufacturers

We work closely with manufacturing leaders to develop customized AI governance strategies that align with operational goals and industry regulations. Whether you’re adopting AI for the first time or scaling your digital infrastructure, our solutions — including cybersecurity, risk management, technical accounting, and digital transformation — are designed to help you harness innovation responsibly.

From safeguarding intellectual property to implementing secure, auditable AI platforms, we help you drive performance while reducing exposure to operational, financial, and reputational risk. Let’s build a smarter, safer future for your manufacturing operations together.

The post AI Risks in Manufacturing: How to Protect Your Operations, IP, and Workforce appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Manufacturers are reassessing supply chains and tax strategies to adapt to shifting tariffs and tighter margins.

• Retailers and overseas suppliers are pushing back on price increases, placing more pressure on distributors.

• Rapid scenario planning and operational agility are essential as companies navigate a fast-changing trade and demand environment.

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After a brief period of optimism, the U.S. manufacturing sector has slipped back into contraction. The Institute for Supply Management (ISM) reported a decline in activity for July 2025, raising fresh concerns about the resilience of an industry already strained by global instability, cost volatility, and labor shortages.

According to ISM reporting, July continues a multi-month downturn in U.S. manufacturing. Rising tariffs on semiconductors, clean tech components, and electronics are contributing to declining optimism and margin pressure.

In response, manufacturers are accelerating reshoring strategies, rethinking sourcing models, and reallocating capital toward U.S.-based production. But these operational shifts carry downstream effects — including supply chain disruption, pricing tensions with retailers, and growing tax complexity.

Tariff Impacts Driving Operational and Financial Restructuring

The latest round of tariff policy changes — particularly those targeting semiconductors, clean tech components, and consumer electronics — has added urgency to supply chain reassessment across the manufacturing and distribution sector. For many mid-sized companies, this is no longer a matter of long-term planning, but of near-term survival.

In addition to long-term shifts, companies are contending with immediate pressures that demand more agile, real-time responses. With the policy environment shifting rapidly, firms need to be able to redirect sourcing, adjust pricing, and adapt operations quickly in response to new trade terms or economic signals. Retailers are resisting price increases amid soft consumer demand, while overseas suppliers show little willingness to absorb added tariff costs. This dual resistance leaves U.S. manufacturers and distributors caught in the middle — facing rising input costs and shrinking pricing power.

This pricing stalemate has forced many companies to absorb margin pressure themselves, accelerating the need for real-time scenario planning and rapid cost modeling. Facing inflexible suppliers and impatient buyers, some firms are exploring new supplier relationships altogether — often under compressed timelines and uncertain economic conditions.

These dual pressures are driving a shift toward faster, more flexible operational planning. Traditional multi-quarter strategy cycles have given way to real-time adjustments, where pricing models, sourcing plans, and capital deployment decisions are made in weeks rather than quarters. Today, manufacturers are engaging in rapid scenario modeling, adjusting pricing structures on the fly, and mapping out contingency plans for everything from inventory shifts to capital deployment.

These changes are not occurring in silos. Every sourcing decision affects tax exposure, every pricing adjustment impacts working capital, and every supplier switch creates new compliance considerations. That’s why companies are increasingly approaching supply chain restructuring as a cross-functional exercise — integrating finance, tax, and operations into a single planning framework built for speed, resilience, and data-informed execution.

Technology Investment Moves to the Forefront

Despite economic headwinds, many manufacturers are prioritizing tech adoption. Automation, AI, and advanced data tools are being used to improve throughput, reduce waste, and alleviate workforce gaps.

However, technology investments only deliver value when aligned with operational and financial systems. That’s why firms are increasingly focused on integrating data across functions, streamlining reporting, and tracking ROI in real-time. The shift isn’t just about adopting new tools — it’s about embedding them into core workflows and decision-making processes.

Advisory support in this space is helping companies make smarter, phased tech decisions — prioritizing high-impact areas first, then expanding as capacity grows. By focusing on tangible results and incremental wins, companies can build momentum while managing risk and preserving capital.

Operational Risk and Controls Under Strain

As manufacturers digitize operations and integrate more advanced technologies, traditional internal controls are being tested in new ways. Increased reliance on connected systems and data flows elevates operational risk — not just in terms of security, but also in accuracy, oversight, and regulatory compliance.

Legacy systems often require updated controls to support modern processes and maintain reporting integrity and process reliability, particularly as companies scale or reconfigure supply chains. In some cases, control gaps can expose the business to financial reporting risks as well as operational disruptions that affect fulfillment, cash flow, or customer trust.

Many organizations are reevaluating risk frameworks, updating governance structures, and taking a more proactive approach to finding and addressing control deficiencies that legacy operating models may have masked. This includes reassessing control ownership across departments and embedding real-time monitoring into critical workflows.

A Time for Reinvention

Strategic roadmaps are being replaced by agile frameworks that enable cross-functional teams to pivot quickly. Multi-year plans have given way to agile playbooks that allow operations and finance teams to redirect quickly. Tariff pressures, labor challenges, and rising technology demands are converging in an environment that is increasingly unpredictable and fast-moving.

The ability to scenario-plan and reallocate resources in near-real time is becoming a competitive advantage — particularly as pricing power erodes and supplier relationships grow more complex. The ability to act quickly — operationally and financially — is becoming a key differentiator, particularly as pricing power weakens and supplier negotiations become more complex.

For mid-sized firms, this creates both pressure and opportunity. Those that realign operations, improve visibility, and strengthen internal decision-making processes will be better equipped to lead through change. Outside advisors are playing a critical role — supporting companies with financial modeling, tax strategy, and operational planning that’s built for speed and uncertainty.

In this climate, long-term success will favor firms that can move with both speed and precision.

Supporting the Industry Through Change

MGO works with manufacturing and distribution companies navigating disruption and building for what’s next. Our team delivers practical, industry-informed guidance to help middle-market companies make confident, forward-looking decisions in times of change.

As pricing pressures and policy shifts reshape the landscape, we can help your organization respond quickly and strategically — adapting financial strategies, modeling supply chain scenarios, and reinforcing risk and control frameworks. Reach out to our team today to learn how MGO can help you move forward with clarity, confidence, and resilience.

The post Your Manufacturing Strategy in a Tariff-Driven Market appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI, talent shortages, and real-time auditing are transforming how financial audits are conducted in 2025.

• Clean, accessible data and early collaboration are key to smoother, more insightful audits.

• Audits are evolving from compliance checks into strategic tools for managing risk and driving better decisions.

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In today’s fast-changing environment, financial audits are more than just a year-end requirement — they’re an opportunity to assess risk, strengthen financial processes, and uncover insights that can drive smarter decisions. But the audit landscape is changing rapidly. Emerging technologies, shifting workforce dynamics, and evolving stakeholder expectations are redefining what a successful audit looks like.

Top 5 Audit Considerations for 2025

Here are five key financial audit trends to keep in mind as the year progresses:

1. Real-Time and Continuous Auditing Are Gaining Traction

Why wait until the end of the year to catch an issue? In 2025, more businesses are moving toward real-time or continuous auditing — and you should consider whether it’s right for you.

By working with your audit team throughout the year, you can test controls earlier, address valuation challenges in Q4, and resolve issues before they snowball into major delays. This approach reduces the year-end scramble and leads to a smoother, more predictable audit process.

Auditors can perform interim work, test new transactions, and review draft financial statements well before the final books close. This shift helps everyone: your team stays ahead of deadlines, and auditors gain more time to focus on high-risk areas.

What you can do: Collaborate with your auditors. Share early drafts of key reports, hold strategy calls, and front-load documentation to ease the pressure in January. A deliverables calendar and clear role assignments can help your team stay on track.

2. AI Is Reshaping the Audit Process — But Clean Data Is Key

Artificial intelligence (AI) and automation are transforming how audits get done. If your auditor isn’t using AI to analyze entire datasets, detect anomalies, or streamline documentation, they’re already behind. AI tools help reduce manual testing, speed up reviews, and allow audit teams to focus on big-picture risks and strategic value.

But the benefits of AI depend on how well you’ve prepared your systems. Poor data quality or disconnected platforms will limit the effectiveness of even the most advanced tools. In 2025, expect your auditors to ask questions about your tech stack, cloud platforms, and internal data governance processes. You’ll need to demonstrate that your financial data is structured, accessible, and secure — or risk delays and incomplete assessments.

What you can do: Start by reviewing your financial systems, organizing your data, and working with your IT and compliance teams to make sure your internal controls align with how AI-driven audits are conducted.

3. The Audit Talent Crunch Could Impact Your Engagement

The audit profession is facing a serious talent shortage — and that could affect your experience as a client. Audit teams are leaner than ever, with firms struggling to recruit and retain professionals who have the right combination of financial reporting, analytics, and tech skills.

The result? Tighter timelines, increased workloads, and in some cases, fewer people available to answer your questions or dive into complex areas of your business.

This isn’t just a staffing issue. It’s about the changing nature of the audit profession. In 2025, auditors are expected to bring expertise beyond accounting — including data analytics and even industry-specific regulations.

What you can do: When evaluating or re-engaging an audit firm, ask about staffing depth and technical capabilities. Make sure your team has a primary point of contact who understands your business and can provide continuity throughout the audit cycle.

4. Firms Are Reassessing Auditor Relationships for Better Alignment

If you’re exploring new audit firms this year, you’re not alone. Many organizations are re-evaluating their audit relationships to find teams that offer deeper industry knowledge, better communication, or more advanced technology.

Making the switch doesn’t have to be overwhelming. With a little planning, you can set the stage for a smooth transition that strengthens your financial reporting and aligns with your long-term goals.

From onboarding timelines to regulatory requirements and data access, there are a few key areas to keep in mind. But the most important step is finding a team that understands your business and can provide a smooth handoff without disrupting your reporting cycle.

What you can do: Work with your new audit firm to create a clear onboarding plan. Set expectations early, discuss timing, and collaborate on gathering documentation so your first engagement starts off strong.

5. Audits Are Becoming Strategic — Not Just a Compliance Exercise

Gone are the days when an audit was just a formality. Today, audits can offer powerful insights into operational risks, data security, and financial performance. Your board, investors, and regulators increasingly expect your audit function to go beyond the basics.

As reporting expectations grow and risk environments evolve, treat your audit like a strategic asset. Work with auditors who not only meet compliance standards, but who also understand your goals and can offer value-added insights along the way.

What you can do: Engage your auditors as advisors. Share your business strategy, new ventures, or expansion plans. The more context they have, the more relevant and insightful their findings will be — and the better your business will be prepared for what’s next.

Turn Your Audit Into an Advantage

Now is the time to align your internal processes with the evolving audit landscape — and choose audit partners who can grow with you. Just as the audit process is evolving, so should your mindset: approach your next audit not as a task to complete, but as a tool to strengthen your business for what’s ahead.

How MGO Can Help

We offer Assurance services to meet the evolving needs of both public and private companies. Our team brings deep knowledge and experience to deliver you a high-quality, efficient audit experience. Reach out to us today to learn how we can support your organization.

The post Financial Audit Trends for 2025: What Your Business Needs to Know appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI adoption will accelerate across both the real estate and the construction industries, helping companies reduce costs, improve efficiency, and manage labor shortages, so if you’re lagging behind, you’ll want to catch up quickly.
• New regulations around biometric data are expected to emerge, especially at the state level, so construction companies will need to proactively safeguard their employee information.
• High-impact projects like data centers, infrastructure builds, and adaptive reuse conversions are expected to drive demand throughout 2025, with smaller commercial developments taking a backseat.

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Across industries, the last year has been challenging for U.S. companies. Uncertainty around the election, steep inflation, and high interest rates have introduced instability and financial pressures that have taken their toll on the business landscape.

As 2025 nears, things appear to be changing: Interest rate cuts are on the horizon, while the end of the election cycle may introduce greater market stability heading into the new year.

Forecasted market stability doesn’t mean the new year will be without its challenges. A new administration and shifting market pressures mean real estate and construction leaders must act now to take advantage of new opportunities and confront persistent obstacles.

Looking for the right information to prepare yourself for the year ahead? Read on to uncover our predictions for real estate and construction in 2025.

Prediction 1: AI use will drastically increase in real estate and construction

AI use has become widespread in the business community, but not every industry is using it equally. While many real estate firms have started adopting AI, the construction industry is largely still in the exploratory stage.

We expect to see both industries drastically increase their use of AI in the next year, driven by the accessibility of generative AI and the opportunity for substantial cost savings, especially as companies seek to combat inflation. AI can also be used to improve safety, streamline project management, and address labor shortages. Already we’ve seen the benefits a company may achieve by leveraging AI. Now is an ideal time for slower adopters, like the construction industry, to make their move.

While both the construction and real estate industries will increase AI usage in the next year, the paths taken may be different. Construction companies will likely prioritize applying AI to project management areas, such as monitoring budget spend, scheduling tasks, suggesting resource allocations, and flagging unexpected delays. Real estate firms, meanwhile, may see the greatest immediate benefit by using AI to streamline communication. For example, using chatbots to answer renters’ simple questions and route more complex questions to appropriate professionals can lower costs while saving time and effort.

Prediction 2: More legislation will be introduced to protect biometric data

As AI makes it easier to collect and analyze biometric data, more construction companies will likely adopt AI to apply to their own biometrics use cases, such an enhancing security and tracking time. At the same time, we expect to see the introduction of more legislation governing how employers use, manage, store, and protect biometric data.

Biometric Data: Unique physical or behavioral characteristics that can be used to verify a person’s identity, such as fingerprints.

Biometric data has serious privacy implications and employees may have concerns around how their private information is being used, stored, and protected. If a construction company experiences a data breach, for example, employees could have their biometric data stolen, putting them at risk of identity theft.

Legislation like this already exists in some states — most notably Illinois — and more state-level regulations will likely pass before federal regulations are enacted. Construction companies should monitor the evolution of biometric regulation in their state and take proactive measures to secure their employees’ data.

Prediction 3: Data center construction will be robust

As tech companies ramp up investment in AI tools, they will need increasingly powerful data centers to support them.

Many tech companies are seeking construction bids to build new centers with the required infrastructure to power and maintain AI tools, instead of retrofitting existing buildings that may not have the appropriate features. For example, data centers that power AI tools generally need more advanced cooling systems than data centers that support technology requiring less computing power, such as cloud computing.

New data centers will likely be built in areas with abundant open space and proximity to key resources, such as power transmission infrastructure and access to labor. Northern Virginia; Austin, Texas; Atlanta, Georgia; and Columbus, Ohio are just a few examples of locations tech companies are eyeing for possible data centers.

Tech companies will face a major challenge in supplying the considerable energy needed to power each facility, as some AI tools require energy that may exceed the capacity of nearby power grids. One possible solution tech companies are exploring is nuclear energy, but they face considerable legal challenges they face in obtaining access to compact nuclear reactors.

Ultimately, as AI use becomes more widespread, the infrastructure needed to support these data centers will also need to increase drastically, which may mean even more construction projects in the near future.

Prediction 4: Commercial real estate will continue to transition to residential living

Commercial real estate faces ongoing challenges as remote work continues and commercial mortgage- backed securities become due. However, industry trends are helping to address obstacles in new ways.

Adaptive reuse — the repurposing of existing buildings — offers opportunities for new residential spaces by retrofitting abandoned malls, schools, office buildings, and more.

In 2025, we expect to see adaptive reuse accelerate, as fewer workers return to the office and the housing crisis continues. Currently, the U.S. has a shortage of 7.3 million rental homes that are affordable and available to renters with extremely low incomes. Adaptive reuse can play a major role in addressing this crisis, especially in urban areas, which tend to see greater housing scarcity.

7.3 Million: Shortage of affordable and available rental homes

Surrounding businesses, many of which are struggling in the era of remote work, can also benefit from adaptive reuse. Without workers coming into the office every day, many coffee shops, restaurants, convenience stores, and other service providers have taken a hit to their bottom line. By bringing more residents into the community, these businesses could see a boost in sales to offset the impacts of remote work.

Prediction 5: Infrastructure and industrial projects will increase

In 2025, we expect construction companies to continue taking on large numbers of infrastructure and industrial projects. Infrastructure projects will see increased investment in part due to the increased frequency and severity of natural disasters, which will require the U.S. to both build new and repair existing infrastructure.

America First policies coming out of the new Trump Administration are likely to bolster domestic industrial projects. Such policies could include expanding R&D tax credits or making permanent certain provisions of the Tax Cuts and Jobs Act that are particularly advantageous to manufacturers. Increased demand for data centers will also feed into the need for more industrial projects.

On the other hand, construction companies will likely see fewer projects from smaller retailers and non-Class A commercial real estate firms. Smaller retailers are experiencing financial pressures, such as pullbacks in consumer spending, that are likely to continue until inflation eases. We expect these pressures to push smaller retailers away from large cap-ex projects in the year ahead.

Class A commercial real estate will likely continue to see high demand. Smaller commercial real estate firms, however, have fewer resources and aren’t as well-positioned to continue investing in construction projects. They are also unlikely to beat out their Class A competitors for large project bids.
Prepare your company for success in 2025.

Written by Kristi Gibson, Brent Horak and Heath Winsheimer. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com

How MGO Can Help

At MGO, we are well-versed in the complex and evolving challenges currently facing real estate and construction companies. Whether you’re looking to evaluate or adopt AI tools, navigate biometric data regulations, pursue adaptive reuse opportunities, or prepare for the anticipated surge in infrastructure and industrial projects, our team offers the experience and strategic guidance to help you move forward confidently.

We partner with companies at every stage — from navigating regulatory complexity to uncovering new avenues for growth — preparing you to be positioned for resilience and success in 2025 and beyond. Contact us to learn more.

The post 2025 Real Estate and Construction Predictions appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Audit committees (ACs) are prioritizing enterprise risk management (ERM) due to a dynamic risk environment influenced by geopolitical factors, supply chain disruptions, and technological advancements.

• The composition and structure of the board are critical for effective risk governance, and AC members need industry knowledge and relevant experience to oversee the ERM process effectively.

• Boards should clearly articulate risk appetites, engage in ongoing education, and stress-test ERM processes, with holistic risk conversations.

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1. Enhanced Risk Governance: Audit committees (ACs) are prioritizing enterprise risk management (ERM) due to a dynamic risk environment influenced by geopolitical factors, supply chain disruptions, and technological advancements.

2. Board and Committee Composition: The composition and structure of the board are critical for effective risk governance. AC members need relevant experience and deep industry knowledge to oversee financial reporting and ERM processes effectively.

3. Leading Practices for Oversight: Boards should clearly articulate risk appetites, engage in ongoing education, and stress-test ERM processes. Effective risk conversations should be holistic, incorporating strategy and planning, and involving collaboration across the organization.

In an era when the business landscape is characterized by rapid changes and rising uncertainties, the need for robust governance oversight has never been more critical. As organizations strive to navigate an increasingly complex business environment, the role of the board in overseeing enterprise risk management, financial reporting, and compliance becomes paramount. This publication discusses the evolving priorities and responsibilities of audit committees (ACs) in 2025, emphasizing risk governance, technology integration, and investor expectations. 

Enhanced Risk Governance and Enterprise Risk Management Integration 

Today’s ACs are watching an evolving risk landscape impacted by significant geopolitical factors, continuing supply chain disruptions, global inflation, and the emergence of technology that for many companies may prove highly disruptive to their businesses. According to the BDO 2024 Board Survey of approximately 250 sitting directors, 31% identified enterprise risk management (ERM) as the governance process requiring the most significant time and effort over the next 12 months. Today’s dynamic risk environment, coupled with regulatory (e.g., SEC) and stakeholder expectations, require corporate risk assessments to cover the entire enterprise, not just financial reporting. A recent Audit Committee Practices Report found that 47% of respondents assigned ERM oversight to the AC, 15% to a risk committee, and 35% to the full board. ERM is expected to be an integrated, holistic process that considers all manner of risks to the organization (e.g., strategic, regulatory, operational, and reputational). Regardless of the express responsibilities within the board and committee charters, all board members are expected to exercise skepticism and be risk aware. 

Governance Structure and Composition   

The combined structure and composition of the board plays a crucial role in risk governance. AC members have a significant responsibility in reviewing and overseeing risk factors as part of their mandate to oversee the financial reporting function, and their directive often extends to oversight of the ERM process as well. This requires well-informed directors who understand not simply financial accounting but have relevant experience and deep industry knowledge about the company’s specific risk factors and the experience to make judgments about how well management is identifying, prioritizing, and managing risks. For example, consider the adequacy of an AC that has the additional responsibility for cyber risk oversight that is composed solely of financial experts who may have no current understanding of the cyber risk landscape or impact of emerging technology on the protection of data to ask informed questions of management about risk detection and mitigation strategies. 

Leading Practices for Board/Committee Oversight  

The board should be responsible for setting and clearly articulating risk appetites and tolerance thresholds and ensuring management is operating within those boundaries. There are several steps directors should take to advise management on risk and strategic priorities. These include: 

• Establishing incentives to provide accurate reporting on risks to the organization 

• Remaining forward thinking and open minded as the business environment rapidly changes 

• Prioritizing ongoing education, including inviting experts into the boardroom (e.g., economists, cyber specialists, technologists, and others) 

• Taking a hands-on approach by engaging with stakeholders, leveraging technology, and performing site visits 

The AC’s oversight of ERM goes beyond oversight of management’s processes to stress testing those results to help ensure priorities are aligned, mitigation efforts are sound, and the company can be resilient against new challenges. The AC should not only review the formal ERM processes performed by management but receive further reporting and updates at an established cadence throughout the year to enhance recurrent risk conversations. The Audit Committee Practices Report indicated 49% of boards discussed ERM monthly, as opposed to the 28% and 20% who add it to the agenda semiannually and annually, respectively. Effective risk conversations have several key characteristics that include considering the company holistically, incorporating the organization’s strategy and planning processes, and collaborating with professionals throughout the organization. Additionally, these conversations may benefit from this list of questions every board should ask about risk management. 

Risk Mitigation and Preparedness  

Much like our own immune systems, organizations are much better prepared to respond to risks if they are generally healthy. If the fundamentals of a business are strong and if potential shocks to the system have been considered and prepared for in advance, the business will be much better positioned to survive.  However, in today’s fast-paced business environment, the speed at which risks can materialize has a significant impact on risk management, often requiring response within minutes rather than overnight. Boards should consider whether management is prepared to identify rapidly materializing risks and react swiftly to disruptions. Resilience programs such as business continuity, IT disaster recovery, and cyber incident response programs should be adequately resourced and include formal documented processes and responsibilities, scenario planning, and crisis simulations that are updated regularly. 

Governance Oversight Priorities   

BDO’s 2024 Board Survey identified the activities directors expect to spend the most time on next year: 

Specific Governance Activities to Strengthen Both Management and the Board 

Conclusion 

Effective risk management and resilience through ERM integration are essential for navigating the complexities of the modern business environment. By adopting leading practices, aligning with strategy, and prioritizing forward-thinking approaches, ACs can enhance their oversight capabilities and help ensure the long-term success of their organizations. 

Emerging Technology and Cybersecurity 

The expanded use of technology is transforming business operations, reducing costs, and enhancing human capabilities. The challenge organizations face is balancing innovation with risk management, focusing on efficiency, productivity, cybersecurity, data governance, and human capital impacts. 

Governance Structure and Composition 

The 2024 BDO Board Survey shows the priority emerging technology and cybersecurity have in boardrooms today. Directors identified “advancing the use of emerging technology” as the second most important strategic priority and “lagging implementation of emerging technologies” as one of the most significant risks. Cybersecurity was also in the top five strategic priorities and significant risks. Additionally, 50% of directors plan to increase investments in emerging technologies, and 41% intend to boost cybersecurity investment over the next 12 months. While some organizations may create additional board committees for technology and/or cybersecurity, many consider the AC the appropriate committee to oversee these areas, given its familiarity with the need for strong implementation and internal control environments designed to protect the integrity of information being used and generated by the company.  

As boards formalize their oversight response to evolving technology, they should consider committee capacity and expertise. According to the recent Audit Committee Practices Report, 58% of AC’s have cyber responsibility, followed by 25% retaining oversight at the full board level. Seventy-three percent of directors report discussing the topic quarterly, followed by 15% semiannually. Similar to the evolution of sustainability oversight, technology is integrated throughout the corporate environment (e.g., human capital systems, operations, supply chain management, third-party risk, and financial reporting). Collaborative oversight will be essential and may require assignment to one or more board committees depending on the significance and pervasiveness of the risks. 

There is an ongoing debate about whether to bring subject matter experts onto the board or to cultivate director “generalists” supported with focused continuing education, with no definitive best practice emerging. For example, while the SEC dropped its proposed requirement to disclose whether cybersecurity expertise existed within the board, the board may determine that having a cyber expert among them may still be warranted. However, we caution about deferring responsibility for significant risks to a single board member. There is also growing support for all directors to be “technology and cyber literate,” much like they should be financially knowledgeable, with many boards encouraging directors to achieve and maintain certifications in these and other significant risk areas. 

In response to the SEC’s cybersecurity disclosures, directors report obtaining external assessments and creating internal processes as the top two areas for improvement in their oversight of cybersecurity. This includes understanding what cyber incidents may be considered material to the business and how prepared the organization is to respond timely and effectively to a cyber incident when it occurs. Consider additionally Questions Directors Should be Asking in Their Oversight of Cyber Risk. 

What is certain is that directors should continue to educate themselves in emerging and dynamic areas, including AI/generative AI and cybersecurity to continue to inform appropriate dialogues with management and auditors. Subject matter specialists may be invited to board and committee meetings to provide education to bolster collective board knowledge and address identified director skill and knowledge gaps, as well as serving as trusted advisors. Often, while these sessions may be requested by the board or AC chair, many boards encourage attendance by all directors and certain members of management.  

Oversight of Generative AI 

Board oversight of generative AI should be considered as part of the broader ERM mandate. From recognizing strategic benefits to mitigating associated risks, the board can embrace AI by establishing a safe environment and a culture of trust that accelerates innovation while promoting long term success. The board of directors further plays a pivotal role in guiding the responsible and ethical use and strategic deployment of generative AI. The board may consider establishing a cross-functional AI team that includes the CIO, CISO, general counsel, and operations providing regular reporting to the board or oversight committee. 

From an AC perspective, many finance teams are identifying efficient AI use cases to help analyze financial information, detect trends, and identify anomalies in large data sets. By the same token, auditors are incorporating AI into their auditing methodologies and tools to drive efficient and effective audits and address audit risk.  

Regulators from government to industry are also keenly focused on the role that emerging technologies play in shaping business opportunities and risks to consumers and stakeholders. We encourage the AC to remain attentive to developing rules and regulations that may impact how their business chooses to integrate and use technology and the impact those choices may have on their stakeholders.  

Questions directors should be asking in their oversight of generative AI. 

• What are the company’s policies around the ethical use of technology? How are those policies monitored, and how often are they reviewed and revised? 

• What is the process for identifying effective use of generative AI? Is the organization monitoring industry and competitor uses? Do these uses align with strategic objectives and business goals? 

• What is the process for adopting innovative technologies from identification to selection, implementation, education to monitoring and compliance? Who is responsible and accountable? 

• What monitoring and compliance controls exist? How are instances of noncompliance reported and remedied? 

• What are the risks associated with generative AI use, and what controls are in place to mitigate these risks?  

• What controls does the company have around the reliability, accuracy, and consistency of its data? 

• How does the organization monitor (and who is responsible for) the regulatory environment to ensure compliance? 

• How is the company mitigating third-party risk? 

• How are we remaining current with respect to developing laws and regulations related to the use of AI?

AI Oversight in Financial Reporting and Use by the External Auditor 

With disclosure demand increasing, it is anticipated that stakeholders will expect similar information around technology governance and oversight to what they are receiving about cybersecurity. Directors should not only confirm the company has processes around technology risk management, strategy, and governance that are operating effectively, but also that the governance oversight is established, documented, reviewed, and revised frequently.  

A recent report The Rise of Generative AI In SEC Filings, states that almost two-thirds of Fortune 500 companies mention AI in their annual report on form 10-K, 11% specifically reference generative AI, and more than half have a risk factor citing AI. ACs should ensure consistent and balanced messaging on emerging technologies, considering the materiality to their business when making public disclosures, while also anticipating stakeholder demand for details on process and governance oversight. 

Underlying the financial statements, ACs should evaluate the impact of technology, including generative AI use in the financial reporting function. Three increasingly interdependent elements — technological efficiency, regulatory compliance, and talent — impact both corporate finance teams and audit engagement teams. Data governance challenges can increase the risk for potential reporting issues, errors, or unreliable insights. 

The PCAOB has started “limited outreach” to understand audit firm and public company perspectives on the integration of generative AI in audits and financial reporting. Findings suggest that the integration is falling behind operational and customer-facing areas for many companies, which was further supported by BDO’s recent Board Survey results. Similarly, while some audit firms have started to incorporate generative AI into their audits, it remains primarily for administration and research as firms proceed cautiously in their testing and vetting of innovative technologies. 

Meanwhile, stakeholder demand for adoption is high. BDO’s inaugural Audit Innovation Survey revealed that senior finance leaders say tech-savvy auditors increase trust and influence auditor selection, while acknowledging continuing challenges in audits as technology is implemented. More than two-thirds (69%) of respondents say established data governance and internal data management are a barrier to a smooth audit experience. ACs should continue to engage in discussion with external auditors, as well as internal auditors, around their use of technology, the associated benefits, and risks. 

The CAQ recently released a resource providing an overview of the technology and regulatory environment along with audit considerations for companies deploying generative AI. They also included sample use cases that may be useful for the AC in the evaluation and oversight of their own company’s generative AI deployment. 

Investor Expectations of Audit Committee Effectiveness 

The AC’s effectiveness is vital for robust corporate governance and investor confidence. While ACs are often assigned expanding responsibilities, they must not fall behind on the traditional mandate of their role. It is important to clearly define and regularly review the AC’s responsibilities and associated charter to ensure compliance with requirements, along with assessing the capacity and experience around expanded oversight responsibilities. 

Questions ACs should be asking about fulfilling investor expectations: 

• Is the AC fulfilling its requirements per applicable rules and regulations? 

• How does the AC determine effectiveness and independence of the external auditor? 

• Is our ERM process fit for purpose with respect to identifying and prioritizing emerging areas of risk? 

• Does the AC inquire about “close calls” – e.g., areas of focus by the external auditor that were considered but didn’t rise to the level of a CAM?  

• If applicable, is management’s remediation of deficiencies being done timely and effectively? 

• How is the AC leveraging internal audit (IA) for value creation and risk mitigation? 

• How often does IA revise their audit plan and update the AC on any deficiencies found? 

• What are the qualifications and experience of the IA team? 

• How is the AC ensuring collaborative input into the company’s disclosures? 

• What disclosure controls are in place, and how does the AC monitor effectiveness? 

• To what depth does the AC review, challenge, and approve items ancillary to the earnings release? 

• Do any/all directors sit in on earnings calls? 

• How does the AC ensure consistency around the company’s internal and external messaging? 

• How are AC members staying current with rules, regulations, and environmental trends? 

• What are the AC’s responsibilities beyond the core requirements, and does the AC have the capacity and experience to execute on them? 

• Does the company’s finance function need additional support? How and when was a gap analysis performed?

Oversight of Internal Audit 

Leveraging IA effectively can provide significant insights into the company’s operations and risk management processes, including emerging and high-priority areas such as AI, cybersecurity, and controls around non-financial data (e.g., sustainability metrics). The Institute of Internal Auditors has issued new Global Internal Audit Standards, effective January 9, 2025. These standards are designed to guide the professional practice of internal auditing and serve as a basis for evaluating the quality of the IA function by those in oversight roles (e.g., ACs). While not mandatory, the standards offer 15 guiding principles and essential conditions (i.e., activities of the board and senior management) that enable effective internal auditing. ACs can facilitate indispensable value from their IA function in several ways, such as: 

• Aligning expectations with the IA mandate 

• Setting clear IA authority, roles, responsibilities, and scope of services 

• Building an open and trusting relationship 

• Understanding the risk assessment process 

• Equipping IA with adequate resources and tools 

• Promoting the IA function 

• Assessing the performance of the Chief Auditing Executive (CAE) and IA function 

• Requiring the maintenance of a current IA charter for approval 

Best practices for the oversight of IA include regular reports to the AC to ensure continued alignment on audit strategy and goals, along with timely resolution of identified deficiencies before they become material issues. The PCAOB has also taken interest and added a mid-term project to consider updates to Auditing Standard 2605, Consideration of the Internal Audit Function. See the BDO Internal Audit Webinar Series and upcoming BDO in the Boardroom Podcast for discussions around emerging topics and best practices within the IA function. 

Oversight of Financial Reporting 

The AC plays a vital role in overseeing financial reporting quality and controls. Recent studies from Ideagen Audit Analytics and the Center for Audit Quality indicate that the number of financial restatements filed by SEC-reporting companies is at or near historic lows, likely the result of continued diligence around emerging risks and robust internal control environments. The AC should remain vigilant in these areas and sensitive to the impact macroeconomic and geopolitical factors will have on their companies, including but not limited to: political elections and potential changes in legislation, geopolitical and economic indicators ( e.g., inflation, interest rate changes, supply chain disruption, changes in tariff policies, war impacts) along with human capital matters associated with cultivating and retaining a skilled finance workforce.  

Regulatory Landscape 

The regulatory landscape is continually evolving, with robust SEC and PCAOB rulemaking agendas, enforcement actions, inspection findings, and litigation continuing to make headlines. The AC must stay informed about these changes and ensure compliance with new regulations, consider priority regulatory areas, and monitor the impact of legislation, as well as an upcoming transfer of executive power in the U.S. 

The PCAOB has prioritized transparent communication and continues to issue Investor bulletins, audit focus, and spotlight publications that ACs are encouraged to monitor. Some recent examples include the PCAOB’s information about their inspection activities that include observations, inspection activities from the past year, and inspection priorities for the upcoming year that can inform ACs in their oversight of the financial reporting and audit processes. The SEC also releases examination priorities and makes public recent comment letters issued to registrants.  

Fraud Risk 

Fraud risk evaluation and oversight are critical components of the AC’s responsibilities, and the current environment constitutes a heightened risk for organizations, including digitally enabled fraud. The PCOAB recently paused its significant proposed Noncompliance with Laws and Regulations (NOCLAR) auditing standard, but ACs should continue to stay informed and involved in this and other rule and standard setting. See the 2024 BDO Board Survey and the PCAOB’s recent Spotlight for discussion around solidifying a culture of compliance.  

Board’s Actions to Prevent and Detect Fraud 

Disclosure 

Recent SEC enforcement has focused on the adequacy of company disclosure controls under Exchange Act Rule 13a-15 and emphasized the need for comprehensive disclosure controls. The Division of Corporation Finance also continues its Disclosure Review Program. ACs should be aware of cited trends — e.g., misleading non-GAAP measures and ransomware attack disclosures — to ensure their company’s own alignment with regulatory expectations. 

Companies may consider maintaining a well-structured disclosure committee, which includes diverse management representation from various departments such as accounting, finance, IT, cyber, sales, and general counsel. ACs should monitor the disclosure committee’s recommendations to ensure transparency and regulatory compliance. Additionally, the AC should discuss disclosure of material judgments to understand exclusions and evaluate the necessity of included information. 

Disclosure alignment should be a priority in AC discussions, ensuring company-wide collaboration and consistency across sources that broadly include (but are not limited to) financial statements, MD&A, earnings releases, proxy statements, company websites, sustainability reporting, and marketing materials. ACs should frequently scrutinize noted comment letter areas and emerging risks, as applicable, such as: 

• China-related matters 

• Non-GAAP measures 

• Critical accounting estimates 

• MD&A 

• Revenue recognition 

• Financial statement presentation 

• Market disruptions 

• Cybersecurity 

• Supplier finance programs 

• Inflation 

• Other related rules (e.g., pay for performance) 

The AC should inquire about the rigor for how disclosures outside the financial statements (such as those related to earnings releases and sustainability reports) are verified for accuracy and consistency, including reviewing presentation slides and management’s commentary, while overseeing internal controls around non-financial metrics. 

The SEC recently disbanded their Climate and ESG Task Force stating the priorities were determined to be well integrated into overall company strategy and risk management. Additionally, the SEC’s new climate rules remain stayed and the issuance of anticipated new human capital rules are in question given the pending U.S. election transition. However, ACs should not lose focus as jurisdictions globally and locally are moving forward with significant reporting requirements that may impact a broad group of U.S. companies and will require significant action by management and oversight of the AC. ACs should discuss the emerging ESG disclosure landscape and company controls that are in place to monitor compliance as well as stakeholder sentiment, remaining attuned to verifiable data that reflect actual practices and do not mislead investors. 

Finance Function Talent Management 

The experience, effectiveness, interactions, and reporting of professionals in the accounting and finance functions serve as an important control in the oversight of financial reporting that the AC receives. In an environment where the war for talent continues, ACs should ensure they are evaluating resources and supporting the needs of the finance function in their companies.  

Oversight of the External Auditor 

Audit quality stems from the AC’s ability to exercise professional skepticism, including challenging assessments and estimates made by auditors and management. It is considered a best practice to build a strong professional relationship with their external auditors, which includes frequent, transparent communications about the audit, including:  

• Auditor independence 

• Scope, status and conduct of the audit,  

• Audit team and the audit firm including engagement team members’ experience, supervision and review,  

• Firm structure and potential impact on audit quality 

• Recent inspection results at the engagement level and at the firm level, and 

• Firm’s system of quality control  

See the PCAOB’s recent Audit Focus: Audit Committee Communications for reminders and common deficiencies in this area.  

SEC’s Office of Chief Accountant Paul Munter released this statement on the recent increase in deficiency rates found in audit inspections and the importance of the role of the AC in ensuring high-quality audits. 

The PCAOB has been active in its rulemaking intended to support the AC’s responsibility in oversight of the auditing function and selection and retention of auditors. This includes the recently adopted standards regarding the audit firm’s system of quality control, required firm reporting, and firm and engagement metrics, which at the time of publication are still awaiting SEC approval. Directors should remain knowledgeable about auditing standards and how those standards may impact the AC’s and management’s engagement with the auditors. Similarly, they should carefully consider proposed standard setting regarding the scope and procedures of financial statement audits, such as the PCAOB’s (NOCLAR) rules. A recent roundtable briefing paper may further impact how the auditor engages with the company, along with the types of controls and additional information that may become a required component of public company audits in the future. 

In September 2024, the PCAOB issued a spotlight focused on recent inspection deficiency findings with respect to auditor independence requirements and highlighted considerations for the AC particularly around its responsibility for the pre-approval of audit firm services, including but not limited to: 

• ACs are required to consider whether any services provided by the audit firm may impair the audit firm’s independence in advance. 

• ACs should consider whether the public company’s policies and procedures require that all audit and non-audit services are brought before the AC for pre-approval.  

• ACs should consider whether their auditor has implemented processes to identify prohibited relationships.  

• If the AC pre-approves services using pre-approval policies and procedures, the AC should consider whether the pre-approval policies and procedures are sufficiently detailed as to the particular services to be provided so that the AC can make a well-reasoned assessment of the impact of the service on the auditor’s independence.  

• Independence is a shared responsibility between the entity under audit, its AC, and its auditor. It is important for the company to have policies and procedures to proactively alert auditors to proposed or pending merger and acquisition activity that could have an impact on auditor independence. 

BDO is poised to release an audit committee pre-approval guide aid in early 2025 to be posted within the practice aid section of the BDO Center for Corporate Governance. 

As the regulatory environment continues to advance at a quick pace, ACs are being encouraged by regulators, auditors, and other stakeholders to be more engaged in the rulemaking and standard-setting process, as well as to remain active in the community establishing and discussing best practices. The PCAOB continues to be especially active in their board outreach and annually publishes high-level observations and key takeaways from their conversations with AC chairs. 

Conclusion 

The AC’s effectiveness is crucial for maintaining investor confidence and ensuring robust corporate governance. By fulfilling its mandate, adapting to evolving risks, overseeing the external and internal audit functions, evaluating significant risks (including potential fraud and emerging risks), and staying informed about regulatory changes, the AC can significantly contribute to the company’s success and the delivery of high audit quality to the markets. 

Written by Mike Stevenson, Amy Rojik and Lee Sentnor. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help 

MGO can provide significant support to audit committees as they navigate their evolving priorities in 2025 through integrating ERM processes and addressing the dynamic risk environment that includes geopolitical factors, supply chain disruptions, and technological advancements. Our team can also assist in assessing and enhancing the composition of your board and audit committees to make sure your members have the relevant experience and industry knowledge necessary for effective oversight. Lastly, we can equip you with guidance on best practices for that board and committee oversight. Contact us to learn more.  

The post Top Audit Committee Priorities for 2025  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Nonprofits are facing an escalating cybersecurity threat, with a 30% increase in cyberattacks in 2024, making it imperative for your organization to prioritize robust security measures.  

• The financial and operational impact of cyberattacks is severe, with data breaches costing nonprofits up to $2million and ransomware demands rising by nearly $1 million in just one year. 

• AI is transforming cybersecurity by enhancing threat detection, automating responses, and predicting future attacks, offering nonprofits a powerful tool to strengthen their defenses.   

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As we step into 2025, the importance of cybersecurity for nonprofit organizations cannot be overstated. The digital landscape is fraught with evolving threats that pose significant risks to the operations, reputation and financial stability of nonprofits. This article aims to highlight the critical importance of cybersecurity for nonprofits, backed by recent statistics and trends, and to persuade executives and board members to prioritize this issue. Additionally, we will explore how BDO can assist in navigating these challenges and how artificial intelligence (AI) will play a pivotal role in defending against cyberattacks. 

The BDO Benchmarking industry surveys noted that mitigating cybersecurity is in the top tier of IT challenges for 2025.  

The Growing Threat Landscape 

Nonprofit organizations are increasingly becoming prime targets for cybercriminals. According to Integrity360¹, nonprofits experienced a 30% year-over-year increase in the number of weekly cyberattacks in 2024. This alarming statistic underscores the vulnerability of nonprofits, which often lack the robust cybersecurity measures found in for-profit enterprises. 

In 2024, 68% of breaches involved a human element, such as phishing or human error. This highlights the critical need for comprehensive cybersecurity training and awareness programs. The financial implications of cyberattacks on nonprofits are profound, with the average cost of a data breach reaching up to $2 million. This includes costs related to data recovery, legal fees and reputational damage control. 

Financial and Operational Impacts 

The financial impact of cyberattacks on nonprofits can be devastating. The average ransom demanded in a ransomware attack increased by nearly $1 million in 2024 compared to 2023. Despite this, very few organizations that paid the ransom received all their data back. Such incidents not only disrupt operations but also erode trust among donors and beneficiaries. 

Nonprofits often operate on limited budgets, dedicating most of their funds to fulfilling their missions. This financial constraint makes it challenging to invest in advanced cybersecurity measures. However, the cost of inaction is far greater. Cyberattacks can lead to identity theft, loss of donor trust and diversion of precious funds to mitigate the damage. 

The Need for Proactive Cybersecurity Measures 

Given the increasing digitalization of nonprofit operations, from online fundraising to managing beneficiary data, it is imperative for nonprofits to adopt proactive cybersecurity measures. Unfortunately, many nonprofits are ill prepared. A staggering 78% of organizations feel their cyber resilience is insufficient to meet their needs. This gap in preparedness makes nonprofits attractive targets for cybercriminals. 

To address these challenges, nonprofits must prioritize cybersecurity at the executive and board levels. This involves not only investing in technology but also fostering a culture of cybersecurity awareness and resilience. Regular training, robust data protection policies and incident response plans are essential components of a comprehensive cybersecurity strategy. 

The Role of AI in Cybersecurity 

AI is revolutionizing the field of cybersecurity by enhancing threat detection, response and prevention capabilities. Here are some top ways AI is being utilized in cybersecurity: 

1. Threat Detection and Prevention: AI systems can analyze vast amounts of data to identify patterns and anomalies that may indicate a cyber threat. Machine learning models establish baseline behaviors and detect deviations, enabling real-time threat detection and rapid response. 

2. Automated Response: AI can automate routine cybersecurity tasks such as log analysis, vulnerability scanning and incident response. By automating these processes, AI frees up human analysts to focus on more complex and strategic activities. 

3. Behavioral Analysis: AI-powered systems can monitor user behavior and network traffic to detect unusual activities. For example, AI can identify phishing attempts by analyzing email content and user interactions. 

4. Predictive Capabilities: AI’s predictive analytics can anticipate potential cyberattacks by analyzing historical data and identifying trends. This allows organizations to implement preventive measures and strengthen their defenses against future threats. 

5. Enhanced Security Operations: AI enhances the capabilities of security operations centers (SOCs) by providing advanced threat intelligence and automated incident response. AI-driven tools can correlate data from multiple sources, prioritize alerts and provide actionable insights to security teams. 

6. Vulnerability Management: AI can continuously scan for vulnerabilities in systems and applications, providing real-time updates and recommendations for patching. This helps organizations stay ahead of potential exploits and reduce their attack surface.

Conclusion 

As we prepare to navigate the complexities of 2025, cybersecurity must be a top priority for nonprofit organizations. The risks are too significant to ignore, and the consequences of inaction can be devastating. By investing in robust cybersecurity measures and partnering with experts like BDO, nonprofits can safeguard their operations, protect their beneficiaries and continue to fulfill their vital missions with confidence. 

For executives and board members, the message is clear: Cybersecurity is not just an IT issue; it is a critical component of organizational resilience and success. Taking proactive steps today can secure a safer tomorrow for your organization and the communities and stakeholders you serve. 

How MGO Can Help 

 At MGO, we understand the unique cybersecurity challenges facing your nonprofit organization. Our team of professionals provides personalized cybersecurity assessments, risk management strategies, and AI-powered solutions to help you strengthen your defenses. From implementing proactive security measures to offering compliance guidance and incidence response planning, we work closely with your executives and board members to build a resilient cybersecurity framework. Contact us to learn how we can help you protect your data, maintain donor trust, and focus on your mission with confidence.  

Written by Ric Opal. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

The post The Crucial Role of Cybersecurity for Nonprofit Organizations in 2025 appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• By embracing business transformation, state and local governments can streamline processes, leverage emerging technologies, and modernize service delivery.

• Overcome challenges like shrinking labor forces and fiscal pressures with strategic planning, automation, and data-driven decision-making.

• Stay ahead of disruption by integrating artificial intelligence and building agile, adaptable systems to enhance public service delivery.

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In today’s fast-evolving world, government institutions face unprecedented challenges that demand rapid adaptation and innovation. Fiscal cliffs, shrinking labor forces, and the disruptive potential of artificial intelligence (AI) are reshaping the landscape of public administration.

To remain effective and efficient, state and local governments must embrace comprehensive business transformation — reforming internal processes, leveraging emerging technologies, and reimagining service delivery.

Key Challenges Facing Today’s Governments

The public sector has always faced challenges, but today’s pressures demand even greater innovation and agility. From budget shortfalls to technology disruptions, understanding the new landscape is key to making informed decisions that will shape the future of your government operations. Here are the key challenges impacting government agencies today:

Fiscal Cliffs and Budgetary Pressures

Governments worldwide are grappling with tightening budgets. Fiscal cliffs — like those faced by many government agencies in the coming years — can have serious repercussions on public services and infrastructure investments. These challenges force administrations to rethink traditional budgeting models, move away from reactive fiscal management, and adopt strategic, long-term planning. Business transformation is the pathway toward achieving these objectives — enabling your government to streamline processes, reduce inefficiencies, and optimize resource allocation.

Shrinking Labor Forces and Labor Pool Challenges

Demographic shifts, aging populations, and changes in workforce dynamics have contributed to a shrinking labor pool within the public sector. This decline poses risks not only to operational continuity but also your government’s ability to meet the growing and evolving needs of its citizens. A leaner workforce necessitates the adoption of technology and innovation to compensate for reduced human capacity. In this context, business transformation isn’t simply about cost-cutting; it’s about modernizing the way government functions to maintain a high level of service delivery despite workforce constraints.

The Rise of Generative AI

Generative AI represents a transformative force that has already begun to disrupt many sectors — and government is no exception. This technology, capable of automating complex tasks, generating insights from vast amounts of data, and even assisting in decision-making, provides a potent tool for enhancing government efficiency. When integrated into public administration, generative AI can support everything from automated citizen service interfaces to predictive analytics for policy planning. However, to harness its full potential, your government must undertake business transformation initiatives to realign your operational structure with these cutting-edge technologies.

Why Business Transformation Is Essential for Governments

Transforming how your government operates isn’t just a modern upgrade — it’s a necessity. Here are the key benefits of business transformation for your government:

Efficiency and Cost-Effectiveness

At its core, business transformation is about re-engineering processes to achieve greater efficiency. For governments operating under fiscal constraints, every dollar saved is a dollar that can be reinvested in critical services such as healthcare, education, and infrastructure. By adopting new technologies, streamlining administrative procedures, and eliminating redundant processes, your government can not only reduce operational costs but also deliver services more swiftly and responsively.

Enhanced Service Delivery

The digital age has raised citizen expectations. People now demand quick, seamless interactions with public services — much like their experiences with the private sector. Business transformation in government involves leveraging digital tools and platforms to offer services that are accessible around the clock. Generative AI can power personalized interactions, automate routine inquiries, and predict future service needs, thereby making public service delivery more proactive and citizen-centric.

Adapting to Workforce Realities

With a shrinking labor pool, government agencies are under pressure to do more with less. Business transformation offers a solution by embedding automation and intelligent systems into daily operations. This doesn’t just compensate for reduced manpower; it enhances the quality of work by freeing up human resources to focus on strategic tasks that require creativity, empathy, and critical judgment. In turn, this leads to a more engaged workforce and a more agile organizational culture.

Data-Driven Decision Making

Modern governments generate and rely on vast amounts of data. Yet, the challenge often lies in analyzing this data effectively to inform policy and operational decisions. Generative AI, when integrated as part of a broader business transformation strategy, can analyze patterns, forecast trends, and provide actionable insights. This data-driven approach not only supports more informed decision-making but also enables your government to be more responsive in real time — an essential attribute in today’s fast-changing environment.

Strategies for Successful Transformation

Creating lasting change requires thoughtful planning and execution. Use these strategies to guide your government’s transformation journey:

1. Embrace a Holistic Digital Strategy

Transformation should not be seen as a series of isolated technology upgrades. Instead, it requires a comprehensive digital strategy that addresses the interconnected nature of modern government operations. This strategy must outline clear goals, integrate legacy systems with new platforms, and ensure interoperability across departments.

2. Prioritize Workforce Training and Change Management

Implementing new technologies and processes will only succeed if the workforce is on board. Government leaders need to invest in training programs that not only familiarize employees with new tools like generative AI but also foster a culture of innovation. Transparent communication and supportive change management practices can help mitigate resistance and ensure a smooth transition.

3. Leverage Public-Private Partnerships

Given the complexity and cost of large-scale digital transformation, governments can benefit from strategic partnerships with private sector technology providers. Such collaborations can bring in fresh expertise, accelerate innovation, and provide access to best practices from other industries. In turn, these partnerships can facilitate the development of solutions that are tailored to the unique challenges of the public sector.

4. Adopt Agile and Iterative Approaches

Government transformation projects have traditionally been large-scale and rigid, which can be counterproductive in a rapidly changing environment. Embracing agile methodologies allows for iterative improvements and quicker adaptation to unforeseen challenges. This approach fosters continuous learning and development, ensuring that the transformation remains relevant and effective over time.

Looking Ahead: A Future-Ready Government

The convergence of fiscal pressures, workforce constraints, and technological disruption demands a bold rethinking of how government operates. Business transformation is not merely a luxury or an optional upgrade — it is a critical imperative for governments that wish to thrive in the 21st century. By embracing a holistic digital strategy, investing in your workforce, and leveraging emerging technologies like generative AI, your government can build a future-ready framework that not only meets current challenges but is also resilient enough to navigate future uncertainties.

How MGO Can Help

Navigating government transformation is challenging, but you don’t have to do it alone. We support state and local governments with a full spectrum of services — including performance audits, technology and cybersecurity, internal audit, fraud and forensics, and strategy and management consulting. Let us help you develop practical strategies that empower your government to thrive in an ever-changing environment.

The post How Business Transformation Can Boost Your Government’s Efficiency appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Manufacturers are expected to advance their AI maturity, using it for product development, demand forecasting, and enhancing the overall employee experience.  

• Building a robust foundation is key for operational success and maintaining a competitive advantage.  

• Manufacturers should anticipate and prepare for potential tariff increases and consider strategies like nearshoring and product reengineering.  

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5 Predictions for the Year Ahead That Will Help Manufacturers Unlock Opportunity 

Are manufacturers ready for sweeping supply chain and trade policy changes? What about strengthening their data foundation? Will companies leverage their internal data to inform where they place strategic bets? 

BDO’s 2025 manufacturing industry predictions delve into these questions and more to help industry executives navigate key trends we forecast ahead.  Whether manufacturers are planning to invest in better data infrastructure, address workforce gaps, or prepare for policy changes under a new presidential administration, they will need to know the challenges — and opportunities — that are going to reshape the industry.   

1. The Industry Will Pivot to Growth Mode 

In the years since the COVID-19 pandemic, the manufacturing industry has been in triage mode, often focused on enhancing resiliency. Focus will change in 2025 as more organizations pivot back to strategy creation and expand growth opportunities.  

Manufacturers will look to return to classic strategic planning processes, doubling down on attractive markets, driving a disciplined approach to execution, and formalizing feedback loops to understand when strategic shifts are necessary. Linking innovation roadmaps to validated diversification opportunities will reinforce the need to integrate across multiple functional areas. 

To support scalability, manufacturers continue to simplify their business operations, as they explore modifying supply chain strategy or investing in new technology. One strategy that manufacturers are implementing to simplify operations is SKU rationalization. SKU rationalization can help organizations with excess inventory or low-performing SKUs analyze and streamline their SKU mix, providing opportunities to invest in the SKUs that can drive profitability.  To help inform the rationalization decisions that will power strategic growth objectives, manufacturers will need demand insights. Getting those insights will rely on leveraging AI and predictive analytics to analyze historical data and market trends, which help uncover key patterns.    

As manufacturers look ahead to place forward-thinking bets, finding ways to streamline business operations should enable them to free up resources to invest in new technologies to support strategic growth.  

2. Manufacturers Will Move Up the AI Maturity Spectrum 

In 2024, many manufacturers were figuring out where they land on the innovation adoption curve as it relates to artificial intelligence (AI). While some became early adopters — those who began experimenting with AI quickly — others ended up as the early majority — those who were willing to adopt after seeing evidence of its benefits. Some manufacturers still have yet to adopt AI as they closely observe and learn lessons from their peers.  

But no matter where they fall on the adoption curve, we anticipate 2025 will be the year that manufacturers advance their AI maturity. The industry will see a variety of AI use cases proliferate. Beyond streamlining routine tasks, some manufacturers — especially those who were early adopters or early majority — will use AI in more sophisticated ways.  

For instance, they may use AI to accelerate product development, including prototyping, machine-learning-informed engineering processes, and models that can simulate product performance and design. AI can also help manufacturers analyze market trends and understand their customers for demand forecasting and horizon planning. Automating these tasks will enable manufacturers to move ideas into development much faster. 

Other manufacturers may use AI to enhance the employee experience. For example, AI can translate instructions into multiple languages in real-time. In doing so, manufacturers can teach new skills and programs to their workforce, despite language barriers, enabling more efficient upskilling across the enterprise.  

3. Strong Data Infrastructure Will Prove Advantageous to Manufacturers 

Building and maintaining a strong data infrastructure remains critical to the manufacturing industry, especially those that have adopted or are in the process of adopting AI. However, many manufacturers continue to face challenges working with a dozen or more disparate systems that have unique and asynchronous data inventories, resulting in weaker data foundations. 

However, manufacturers cannot delay addressing these issues any longer as setting a strong data foundation is critical for operational success. That is because, in 2025, we expect manufacturers with greater data maturity will not only expand their AI use cases but also take a more data-driven approach to all operations to gain a competitive advantage. Some manufacturers, for example, will analyze plant floor data to optimize production practices and help cut costs. Others may leverage data to bolster their employee retention efforts, identifying turnover trends and understanding how employee churn impacts output quality from their warehouses. Manufacturers cannot afford to wait to establish a strong data foundation as their level of data maturity will dictate the success of these use cases and greater operations.  

Manufacturers that invest more in their data infrastructure now will ultimately be able to make more informed decisions that can advance their growth strategies, mitigate risk, and outpace competitors.  

4. Trade Policy Likely to Change, Manufacturers Will Look to Offset Tariff Impacts   

Under the new administration, tariffs may rise by 10% on imports from all countries, with a 25% increase on imports from Canada and Mexico. President-Elect Trump has proposed an additional 60% tariff on Chinese goods, atop existing tariffs from 2018 under Section 301 of the Trade Act of 1974. While awaiting potential changes to trade policy, manufacturers should start planning now. 

In 2025, manufacturers may increase nearshoring efforts and seek new sources to reduce dependence on China, as changes in determining the country of origin for Chinese goods are being discussed. Traditionally, the “substantial transformation” rule has been used for country-of-origin decision making, meaning final processing in the country of export has to result in a change in name, character, and use of raw materials for that location to be the country of origin. New proposals suggest determining the country of origin based on the country that owns the factory producing those imports. This change could affect offshoring and nearshoring plans. 

Some manufacturers are expediting orders and stockpiling to control their supply chain, a trend likely to continue in 2025. Others will look to offset tariff costs by cutting spending in areas like fuel or logistics. 

Manufacturers may also engage in product re-engineering to try and avoid tariffs altogether, by changing a product’s design or components to qualify for a lower tariff rate under a different Harmonized System (HS) code. However, this only applies to certain tariffs, like Section 301 China tariffs. Other tariffs, such as the 25% duties on Canadian and Mexican goods, depend on the country of export. A broader strategy should be considered that involves lowering customs values, but transfer pricing rules for income tax must be taken into account to avoid double taxation for related parties. 

As manufacturers navigate potential tariff increases, they may explore a mix of these tactics to mitigate costs. Yet, they will have to increase the time spent on research and development (R&D) and determine how these services and any intangibles affect the transfer price and customs value. Finally, manufacturers must map the entire supply chain of any new materials or finished goods they are sourcing — and verify that they are acceptable according to labor, safety, and environmental compliance mandates. 

5. Rethinking Labor Sourcing Strategies Will Be Non-Negotiable 

Manufacturers face a two-fold labor challenge. On the one hand, the industry is encountering an aging workforce, with many manufacturing employees retiring. Simultaneously, as job duties become technically advanced, manufacturers need to fill skill gaps within the talent pipeline, which can be difficult.  Both issues will be critical for manufacturers to navigate in 2025.   

There are several methods manufacturers will consider to address the increasing workforce gap. For example, attracting more women to manufacturing jobs is a key play. There is increasing opportunity for manufacturers to collaborate with educational institutions and policymakers, as well as offer training and education programs targeted toward women, to grow their talent pool. In addition, manufacturing faces a lack of available talent for the plant floor due to the “Great Retirement” wave. When legacy employees depart, there is a need to backfill roles quickly to meet demand. To help, companies may consider bringing back recent retirees on a part-time basis to keep important institutional knowledge intact in the short term. 

Another critical tactic manufacturers will deploy is hiring more employees with science, technology, engineering, and mathematics (STEM) skills.  Going forward, we expect manufacturers to place a high value on hiring technical specialists across the enterprise because they need employees who bring advanced technological, AI, and data analytics expertise. However, attracting STEM talent can be difficult. Despite the STEM workforce only growing by 20% between 2011 and 2021, modern manufacturing companies still face a gap: the need for STEM workers has accelerated at a faster pace than manufacturers are able to identify and hire the appropriate talent. To remedy this effectively, manufacturers will need to increase local educational and technical training programs and partner with universities to enhance recruiting efforts. 

Preparing for the Future 

Looking ahead, manufacturing executives should embrace transformative strategies that will shape the industry’s future. From fortifying their data infrastructure and leveraging AI to streamline operations, to preparing for trade policy shifts, 2025 presents opportunities to redefine business growth. By addressing these trends now, manufacturers can better position themselves for success in 2025 and beyond. 

Written by Bill Pellino. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help  

As manufacturers prepare for the shifts ahead, having a professional to help you navigate these complexities can make all the difference. MGO’s team offers deep industry experience to strengthen your data infrastructure, integrate AI-driven efficiencies, and strategize around trade policy and workforce challenges.

Whether it’s guiding businesses through regulatory changes, streamlining operations for growth, or implementing cost-saving strategies, we can provide tailored solutions that help manufacturers seize opportunities in 2025 and beyond. With the right planning and insights, you can not only adapt to change but thrive in an evolving landscape. Contact us to learn more.  

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