With technology permeating every aspect of a business, one begins to wonder what technology is reserved for digital risk management rather than the other facets of integrated risk management (business continuity management, enterprise legal management, audit management, corporate compliance and oversight, and vendor risk management). For many, digital risk management calls to mind cutting edge technologies that are only now starting to see commercial applications: internet of things, blockchain technology, artificial intelligence. While these technologies and others do fit within the boundaries of digital risk management, the parameters of what constitutes digital risk management are not based on what technology is in use. Instead, digital risk management is predicated on a digitized business model. For digital risk management to be relevant to a business’ approach to integrated risk management, that business must first need it.
What Constitutes A Need For Digital Risk Management
When a security leader begins to assess their needs for an integrated risk management approach, digital risk management is often the most nebulous and least defined in terms of both critical capabilities for an integrated risk management solution and the risks associated. There is, however, the baseline determining factor to know whether your organization must consider digital risk management capabilities: the extent to which your organization conducts digital business.
Digital Business: Transformation versus Optimization
According to Gartner: Digital business transformation is a type of digital journey that an enterprise undertakes to develop new revenue streams, offerings, and business models. Now, there are two roads that organizations can take when digitizing - transform or optimize. Digital transformation uses new technology to almost entirely change in approach to how the organization delivers its value to its customers. Digital optimization has a more internally facing impact as these initiatives use new technologies to enhance existing processes and practices to improve existing revenue streams.
Transformation case study: DBS Bank
The DBS Bank case is one that is almost iconic for a successful digital transformation. The Singapore-based bank went from customer perceptions that DBS stood for “Damn Bloody Slow,” to a seamless almost all mobile banking experience that is powered by AI. The behind-the-scenes culture shifts that occurred are also hallmarks of a total transformation of an organization. The process was an end-to-end overhaul of the bank's approach to delivering value to their customers, and the result was astounding.
Optimization case study: Hershey
The Hershey Company has long been a household name for their chocolate and candy creations. In 2017, they used cloud technology, AI, and internet of things technology to optimize the manufacturing line of Twizzlers. From a customer perspective, this had minimal impact on the product itself: Twizzlers were still the same. From an internal perspective, though, the insights delivered from the AI algorithms and the IoT sensors resulting in millions of dollars in savings with the increased precision and efficiency.
Optimization or Transformation - you are embracing digital risk
Whether your organization embarks on an entire overhaul of the organization like DBS or implements technology to augment your existing practices like Hershey, new threats emerge based on the technologies that make it possible. Digital risk comes from these technologies themselves (much the same way that supply chain risk arises as you develop a supply chain and so on).
The Most Important Facet of Integrated Risk Management
For many, digital risk management is often confused as the term implies that up until this point security professionals have not taken on digital risk. The main reason the role of CISO emerged was from the digital dangers of the late 80s and 90s. While digital risk management implies that it is referencing the technology that the risks come from, actually, the term emerges from why these risks are taken on in the first place: digital business. As more organizations embrace digital optimizations and eventually digital transformations, they embrace digital risk. In the context of integrated risk management, digital risk management represents the collection of risks from digital business functions, which may one day eclipse all other functions.