Perspectives
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.
Those who hope to capture the full value of their digital investments need new approaches to how they view risk, manage risk, and harness risk for growth.
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 cyber security risk landscape
- Combating weaponized misinformation
- Managing data risks 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.
Efficient
Reduce cost and increase speed in identifying and addressing risk issues
Accelerated identity and access management enabled by robotic process automation
Automate processes, such as managing access requests and role provisioning, to reduce response time by decreasing the need for manual interventions.
Automated regulatory reporting enabled by natural language generation
Automate generation of suspicious activity reports after reviewing account transaction history to identify anomalies.
Easier access to compliance information through conversational interfaces
Communicate with a chatbot to easily identify relevant policies and regulations required to stay compliant.
Accelerated financial close processes enabled by cloud-based workflow tools
Use cloud-based accounting and reporting tools to accelerate financial close processes that were once manual and scattered.
Intelligent
Improve quality, increase accuracy, and derive richer insights to identify and address risk issues
Augmented detection capabilities through computer vision
Automate inspection of products and environments to spot anomalies invisible to the human eye, such as small cracks and leaks.
Simulated crisis management situations in digital reality
Simulate real-world crisis events in an immersive environment to better prepare people to respond optimally.
Reduced risk of insider trading through machine learning
Use past communications from traders to build a model that determines anomalous behaviors associated with trading violations to avoid regulatory infractions.
Enhanced due diligence for third parties
Perform ongoing due diligence for third parties by automatically searching open and deep web sources, watch lists, sanction lists, and regulatory sites.
Transformative
Adopt a completely new approach to identifying and addressing risk issues
Reduced supply chain risk using blockchain-enabled proof-of-provenance
Provide a trusted and accelerated process of verifying origin, safety, and authenticity of products across the supply chain.
Transform third-party risk oversight through a shared utility model
Employ a cloud-based platform that enables sharing of third-party risk assessment data and insights, analogous to the way ratings websites offer data and insights on consumer businesses.
Proactive management of reputation and culture risk
Continuous monitoring of insider threat and reputation risk through predictive analysis of online behaviors, and proactively intervening before bad conduct occurs.
Enhanced product safety and quality enabled by digital twins (virtual replicas of physical objects)
Analyze sensor data on a large scale in real time to predict faults before they occur and schedule maintenance.
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
Let's talk
Contact us to discuss how you can better prepare for what’s ahead. We can help you identify ways for your organization to manage risk, create value, and effectively power your performance.
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