It is crucial for companies to address and manage the newly evolving risks
effectively to succeed in the enterprise digital transformation journeys.
“Digital risks” have been around even before the inception of the age of digital transformation. However, with digitization getting accelerated, new risks have come up, amplifying the existing risks that most fast-moving companies tend to overlook. Additionally, the traditional ways of risk management don’t always account for the new types of risks or are too burdensome to scale.
Reputational risks have played a prominent role for as long as the business exists, but digital transformation is shrinking the world down – amplifying their effects. A lawsuit, product failure, disgruntled customer, and a negative review are all examples of considerable threats to any company’s reputation and brand image. Internet and social media have created increased visibility and risk to the companies’ reputations over the past years. The damage can be costly to reverse.
Technology risks –predominantly cyber threats -also include potential failures in the computer, application, infrastructure, database, and connected devices. In this sudden movement to remote working, enterprises are exposed to such technology risks that can disrupt business.
Technology risks could come from acts of nature, accidents, or other catastrophes, and are not limited to the walls of the company. Many companies also leverage third parties, cloud-hosted tools, software, and infrastructure, and similar risks apply to those systems as well.
Privacy risks include potential loss, theft, or unauthorized disclosure of critical personal
information (workforce, customer, consumer, and so on). With technology innovation coming up ahead of most security efforts, businesses have many soft spots for hackers to go after in their search for valuable consumer data. Country and regional privacy regulations continue expanding and may affect the businesses, too.
With so many regulations planned out, the odds of avoiding a problem are comparatively much lower, and the costs of recovery are higher as compared to the previous regulations.
Talent and culture Risks
Talent and cultural risks are one of the most ignored ones to be mentioned. Considering the
digital threat; “people” remain as one of the most significant risk factors. The truth is, people and their culture might pose one of the greatest risks to organizations, especially impacting their reputation. Before embarking on the digital transformation journeys, firms need to ensure that they create an environment that’s ready for the change—with digital-friendly workplaces by proper employee training and upskilling. Also, staying open-minded and responsive to the change is a must to avoid being late adopters.
Third-party risks induced by vendors, suppliers, business partners, contract manufacturers,
affiliates, distributors, resellers, brokers, agents, contractors, and guests to facilities – are the ones that can create maximum losses. Very often, larger enterprises with multiple third parties or vendors miss out on the risks extended outside their own walls. Especially during the current COVID-19 crisis, enterprises are exposed to such third party risks due to higher dependencies.
The use of third parties is not a new concept — companies have worked with third parties for years. What has changed, however, is the scale and frequency of third-party use and the regulatory focus on how businesses are managing the associated integral risks.
Digital transformation is a convenient term to define the disruptive journey that companies
undertake to use the fast, new, and frequently changing digital technology landscape and
associated business models. It’s not about taking old products and simply re-establishing them in the cloud – it’s about solving the existing problems better, with enhanced creativity, to deliver experiences that build and excite fierce loyalty from users, customers, and employees.