Future of risk in the digital era
Transformative change. Disruptive risk.
Tackling digital transformation risks and digitally transforming risk management.
Digital technologies in a new era of risk
Digital technologies are ushering in a new era and driving transformative changes in every industry, as organizations adopt these technologies to redefine how they create, deliver, and capture value. Identifying, understanding, and addressing new risks associated with digital transformation will help businesses derive more value from their efforts in the future.
What’s more, understanding how digital transformation can be applied to risk management will enable organizations to take a more balanced view of digital technologies as both a source of risk and a way to manage risk.
Emergence of new risks and the evolution of existing risks
We’re witnessing massive investment in digital transformation across industries. An IDC study of worldwide spending on digital transformation estimated at more than $1 trillion will be spent in 2018. This spending is driven by a proliferation of new digital technologies and a fear of disruption by tech-enabled competitors.
Many organizations have been quick to not only update their technology infrastructures but also transform their operating models, customer engagement models, and even fundamental business models.
Organizations understand that digital transformation can capture new growth opportunities while heading off the threat of disruption. These same organizations soon learn that emerging technologies create new risks that they haven’t encountered before and also add complexity to existing risks. The interconnected nature of these risks creates a need to tackle them concurrently, rather than in isolation.
We see nine key trends shaping risk in the digital era:
- Managing the black box of artificial intelligence
- Evolving governance and controls for automation
- Protecting against the changing cybersecurity risk landscape
- Combating weaponized misinformation
- Managing data risk for value creation
- Bolstering organizational resilience in the age of hyperconnectivity
- Navigating regulatory change for emerging technologies
- Enabling digital transformation by managing culture risk
- Owning digital responsibility and ethics
Leveraging technology can help organizations better manage risk
While digital technologies introduce new risks, they can also enhance risk management, enabling new capabilities and unlocking possibilities considered unfeasible in the past. Investments in digital technologies to manage risk can increase effectiveness and efficiency and even transform approaches that render certain risks irrelevant.
Organizations can use digital as a lever to rationalize and optimize their risk management practices to derive efficiencies and reinvest in modernizing risk. While knowing what to focus on can be daunting at first, the following guiding principles can help organizations identify potential uses of emerging technology to better address risks.
Organizations can harness risk to power performance in a digital world
Organizations are conscious that digital transformation involves more than technology adoption. It requires concerted efforts to define how enterprises organize, operate, and behave by aligning strategy, structures, processes, people, and technology to build a unique digital DNA. Organizations can sidestep unnecessary risks and harness risk to power performance by adopting a risk lens and a holistic approach as part of their efforts.
Below are a few guiding principles:
- Make smart(er) risk management a part of digital transformation
- Plan for a digitally proficient workforce
- Digitally transform risk activities
- Revamp operations to manage risks from emerging technologies
- Build ecosystem partnerships to manage risks