Author: Robert Bill and Dan Tolman, Robert C. Bill & Associates, Inc.
Nine-million-dollars… That’s how much hackers demanded of a construction company back in 2019. Since then, the technology continues to advance and we continually rely on it more and more because it becomes difficult to compete without it.
While artificial Intelligence (AI) has been a topic of concern in recent months, its utilization in construction is nothing new. Some more rudimentary AI features can be found in construction management systems dating back to the late 1980s. Since then, the technology has advanced incrementally until significant advancements came to market in 2013. Construction Labor Management software began to incorporate predictive analytics based on historical project data, and optimize labor utilization by analyzing worker availability. Some of the numerous concerns expressed by the advancements in AI include inadvertent bias, reliability, dependence on technology, and data privacy/security. Privacy and security concerns are not unique to only those systems that incorporate AI. Cybersecurity threats, being an equally prevalent topic of concern, necessitate a discussion on privacy and security exposures in construction labor management technology, as well as managing the associated risk. These exposures only grow with the proliferation of increasingly advanced technology, like AI.
You’ve likely spent a fortune on upgrading your computer system and the newest management software for your construction company. While this made you more efficient, it also exposed your company to risks you have never had before or, at least, was not likely enough to worry about. Now you have your employees’ names, addresses, and social security numbers in your computer. Your bidding rates, margins, and all costs, including labor, material, insurance, and overhead, are stored electronically. Half of your workforce needs to access their computer, laptop, tablet, or cell phone to communicate, pay vendors and subcontractors, access drawings, report incidents, and submit pay applications to customers. Your labor management software can include scheduling, time tracking, payroll, planning, communication, training, and even safety compliance.
If your employees’ or subcontractors’ private information is released, you can be liable. Hackers can threaten to release your costs, margins, and rates to your competitors unless you pay them a ransom. Denial of service attacks can render all of that expensive hardware and software useless. Your business and projects can be delayed or even stopped, potentially triggering liquidated damages or other penalties if your labor management system is disrupted. Fortunately, Cyber Liability policies and Network Security programs continue to evolve with both extensions and restrictions in coverage, depending on their evaluation of your system and compliance with their underwriting standards, however many contractors still do not fully avail themselves of the protection they can provide or the risk they can transfer to the insurer.
Cyber Liability policies can provide coverage for Employee Privacy Liability, Cyber Extortion, Business Interruption, even Cyber Terrorism. Some policies will even cover your third-party risk should you inadvertently cause a security breach to the system of another. There are also certain expenses, which you could be required by law to incur, in the event of a security breach. This can be covered as well. No system of network or digital safeguards is completely foolproof no matter how sophisticated or strictly enforced. Given the rise in our dependence on technology as well as the mounting threats to security, this is an issue that should be addressed sooner rather than later. If you have not obtained cyber liability, or have not reviewed the policy you have, it is time.