Protecting your business from increased digital risk
Business conversations have included digital transformation for decades. However, more recent innovations have made it much easier for businesses to seamlessly integrate digital technology into their operations.
While these technologies improve efficiency, support personalization, and promote safety, they also challenge risk managers to protect company information, prevent data breaches, and reduce potential threats that can accompany doing business with third-party vendors.
The COVID-19 pandemic has prompted 61 percent of board members to accelerate their companies’ digital business initiatives. But with that acceleration comes increased digital risk, which Gartner defines as "risks inherent in digital products, services, and supporting processes." As businesses continue to adopt and increase their use of cloud, big data, social media, and mobile platforms, the potential for digital risk expands exponentially.
It’s also unlikely that digital transformation will slow once the pandemic ends. Companies have recognized the value of this movement, whether it’s improving customer experiences, facilitating and supporting telework employees, or streamlining and modifying existing -- or creating new -- business processes.
Risk managers need a seat at the executive table. Their voices, knowledge, and influence position them to lead their companies’ digital risk management approaches with proactive strategies. While the shape of those strategies depends on the company and its sector, they share basic characteristics.
Defining Digital Risk
Digital risk includes an ever-growing range of outcomes that negatively affect organizations, companies, and businesses across all industries. Experts classify these risks as:
- Automation
- Compliance
- Cybersecurity
- Data privacy
- Resiliency
- Workforce
No company that adopts new technologies is immune to risk -- but it’s possible to leverage strategies that lower digital risk when adopting those technologies. The manufacturing industry has embraced digital transformation by incorporating B2B eCommerce solutions, relying more on cloud-supported IoT to manage their assets, personnel, or risk, and implementing automation systems that help increase production.
However, those digital projects bring risk with reward. The COVID-19 pandemic has exacerbated issues with healthcare cybersecurity, with CI Security reporting a 35.6 percent increase in breaches in the latter half of 2020. And as businesses increased their social media spending 74 percent from the beginning to mid-2020, they saw a strong ROI -- but also increased risk because of their increased reliance on and partnerships with third-party vendors.
Managing Risk Throughout Digital Transformation
Companies that fail to anticipate and prepare for possible -- and likely -- digital risks face the potential for data breaches, business interruption, fraud or theft, loss of position within the marketplace, and damage to their reputations and customer relationships.
To deploy a successful digital risk management strategy, a business’s leadership team must prioritize and invest time in developing it. Everyone from the top down must take ownership of the process. A business’s risk manager should take the lead and:
- Collaborate with leadership to evaluate the current culture and develop the company’s culture of risk
- Identify the tools, tech, and training deskless and remote employees need -- rather than relying on the more than 56 percent who have adopted their own technology to fill gaps -- to help manage cyber risk
- Educate employees on topics like phishing and email scams, malware, and provide best practices for creating strong passwords to help personnel understand risk management and make informed decisions
- Develop relevant communication strategies that share information organization-wide to promote transparency
Preparing for the Future of Risk
Even after we find ourselves on the other side of the pandemic and offices and businesses resume normal operations, the threat of digital risk will remain. Companies that turned to digital products or services and third-party tech to support remote work and other operations will continue to use and expand their reliance on these technologies.
Risk managers who approach digital transformation and its inherent risks strategically and proactively position their companies to embrace opportunities for driving better customer experiences, enhancing communications, accessing new datasets, and achieving growth.
Photo Credit: Robert Kneschke/Shutterstock
Matt Kunkel is the co-founder and CEO of LogicGate. Prior to LogicGate, he spent over a decade in the management consulting space building technology solutions to operationalize regulatory, risk, and compliance programs for Fortune 100 companies. Kunkel regularly speaks and consults on risk and compliance topics.