Risk Management in a Digital World
Digital Transformation
Already for quite some years the term digital transformation has been a hot topic. Organizations nowadays need to digitize to be competitive and to stay competitive in fast evolving markets.
Trend research shows that customers expect a digital customer experience, it has become the new norm and it has become a significant defining factor in the success of an organization. Next to the digitization of the customer journeys, organizations need to integrate their applications and all of their user experiences to meet customer expectations and deliver success. The top benefits of integrating user experiences are increased customer engagement, better visibility into operations, and boosting innovation. To further increase the productivity and efficiency of employees, trends also show that it has become important to automate processes to ensure that employee time is freed up.
Digital Trust
Where in the past it was common that trust with customers was established via face-to-face contact and a handshake, nowadays most customer contact happens digitally. This means that the establishment of trust between the organization and its customers has also shifted. Digital trust is a significant factor in the success of an organization as customers, employees, suppliers and other stakeholders need to know that their online relationships with an organization are reliable and trustworthy. The tolerance for any breach of digital trust is near zero.
Key factors that contribute to Digital Trust are:
- Quality: Assure products and services meet or exceed expectations.
- Availability: Enable access to information and services in a timely manner.
- Security and privacy: Ensure all data are protected and kept confidential.
- Ethics and integrity: Live up to all promises.
- Transparency and honesty: Be truthful in how information is used and if it is compromised.
- Resiliency: Take steps to ensure organizational stability and agility.
Role of Risk Management
As described above it is mission critical that the organization's strategic and business objectives are met by the digital transformation initiatives. This is where proper risk management comes into play and where it adds value. What is important to realize is that the aim of risk management is not to take no risks, the aim is to make informed decisions based on a complete and transparent picture of all the risks that the organization encounters.
The traditional role of risk managers has also changed over the past years. Where in the past processes and technology were quite stable, it was reasonably easy for risk managers to oversee and be involved in these changes to properly advise the business. However, with digital transformations, an agile way of working has become more or less the norm. Changes are performed on a very frequent basis, technologies and business requirements rapidly evolve, which all brings a broad spectrum of formerly unknown risks and massive workloads. Because of this big change capacity, in the traditional risk management process, organizations would need to hire a big pool of risk managers to ensure that the risk function is still able to keep their oversight. Of course this situation is not feasible.
To properly adapt to this new way of working, a current risk manager would need to ensure that within the business, there is a better understanding of risk management. The business needs to have clear guidance on what needs to be done, when and by whom. When the boundaries to manouvre are clear and the business has sufficient knowledge to manage the risks themselves, the role of the risk manager is to step in when boundaries are exceeded, to spot check on the process and to continuously raise awareness to manage risk. This can only be realized when the risk management activities are integrated in the standard processes that are already available and when responsibility and accountability is properly governed.
