Comprehensive Review of AI Hallucinations: Impacts and Mitigation Strategies for Financial and Business Applications

This paper investigates the causes, implications, and mitigation strategies of AI hallucinations, with a focus on generative AI systems. This paper examines the phenomenon of AI hallucinations in large language models, analyzing root causes and evaluating mitigation strategies. We identify core contributors such as data quality issues, model complexity, lack of grounding, and limitations inherent in the generative process. The risks are examined in various domains, including legal, business, and user-facing applications, highlighting consequences like misinformation, trust erosion, and productivity loss. To address these challenges, we survey mitigation techniques including data curation, retrieval-augmented generation (RAG), prompt engineering, fine-tuning, multi-model systems, and human-in-the-loop oversight.