Going Digital?
“Digital“ is a word that has been trending nowadays. You would often find the hashtags of digitization, digitalization and digital transformation trending on LinkedIn and Twitter. But many people turn a blind eye to what difference there actually is between these terms. In hindsight, there has been a lot of confusion between these terms before, but there are subtle differences between the terms as of today.
Digitization
Digitization means converting a physical or analog piece of information into a digital format. For example, by scanning a document and converting it to a PDF file, we are digitizing it.
Digitalization
Digitalization refers to creating or improving a process or a business using digitized data or inherently digital data by giving rise to new business models. It could be said that digitalization is brought about by digitizing at least one step in a process.
Digital transformation
Digital transformation involves the use of digitalized processes instead of manual or less efficient techniques to carry out those processes. Credit card applications becoming paperless is an example of digital transformation.
Digitization
Digitization means converting a physical or analog piece of information into a digital format. For example, by scanning a document and converting it to a PDF file, we are digitizing it.
Digitalization
Digitalization refers to creating or improving a process or a business using digitized data or inherently digital data by giving rise to new business models. It could be said that digitalization is brought about by digitizing at least one step in a process.
Digital transformation
Digital transformation involves the use of digitalized processes instead of manual or less efficient techniques to carry out those processes. Credit card applications becoming paperless is an example of digital transformation.
Digital Transformation takes time; it is not achieved in an organization overnight. An integrated strategy is required for digital transformation covering the processes, operations and businesses. Extensive strategic plans are developed to support it. With digital transformations, organizations are exposed to digital risks. The existing risk frameworks are now being continuously updated and enhanced to control the risks which the organization is exposed to from introducing new digitization technologies. However, the frameworks have quite a lot of catching up to do. Therefore, it is imperative that every organization focuses on digital risk management, as digital risk is as much a business problem as it is an IT issue
So What Indeed Is Digital Risk?
With this in mind, we could explore what digital risk is. Digital risk is the risk involved in digital business or processes. Another way of understanding Digital Risk is the events which could cause a disruption of business continuity concerned with the digital realm. Most of this is covered by IT systems, databases and connectivity to the Internet. Breaking down Digital Risk into its constituents is contentious as different organizations have their own interpretations and priorities. Since we can think of so many types of events that could be categorized in Digital Risk, viewing Digital Risk as a whole can be overwhelming. Thus, the general practice is to classify it into components for a specific yet overall comprehensive understanding. And to create frameworks for effective management to reduce the impact of these risk-events on the business continuity, if not eliminate it.
There are different ways which we could classify the components of Digital Risk. One method could be categorizing the risks in terms of cyber, physical and reputation. Another could be by processes, governance, data and technology. The aim is to create a framework with classifications that are as mutually exclusive and collectively exhaustive as possible. At the same time, there are factors which need to be given more attention (for instance, the cloud) owing to the dynamic nature of our digital ecosystem. Thus, one could argue that an overlap between the components is inevitable. Based on the overall inferences garnered from this approach, the components of digital risk have been identified as follows:
Components
Workforce
There are varied benefits of having a dynamic workforce, like flexible staffing, permitting access to diverse ideas across the organization, technology and productivity. However, having a dynamic workforce is indeed a source for digital risk. For instance, as an employer, you consider the protection of the organization’s sensitive information and Intellectual Property on the employees’ devices.
Third-Party
Many companies deem it appropriate to outsource part of their operations and businesses to third parties in order to manage internal costs. While this is indeed in a bid to increase efficiency, it also results in higher third-party risk. Organizations have far less control over the information handed out to third parties than those given to their employees.
Resiliency
Resilience is the ability of an organization to identify, sustain and mitigate events that could prove to be disruptive to the organization, but also within a stipulated time. A low resilience indicates higher time taken by a service to resume its services after any kind of disruption and can stand as a risk in the form of lower customer satisfaction.
Operational
It involves the risks in carrying out the digitalized processes in order to achieve business objectives more efficiently. Its scope also includes the controls which are implemented over the business operations.
Strategic
There will always be risks involved when organizations enter new businesses or try to modify or revamp the processes involved in achieving their current business objectives.
Cybersecurity
Cyber risk is the risk associated with unwanted or unauthorized access to the organization’s IT systems, either physically or electronically. It is one of the most important aspects of digital risk, as it brings in its scope the security of all the systems and software and user endpoint devices on the whole network.
Cloud
Cloud-based services have been one of the most widely adopted technologies in recent years, which have been a huge part of the journey of digital transformation. Needless to say, there would be certain risks inherited when an organization migrates its infrastructure, software or platform to the cloud.
Data Management
Data Privacy and Data Security has been a serious issue for organizations and the public alike. Owing to the trend that data has been dubbed as the new oil, nobody would like to compromise on data integrity, given its value in the present day.
Compliance
Organizations, governments and the public are coming together to develop frameworks to assess vulnerabilities and threats in a more efficient way. NIST and ISO are examples of the popular ones. Being compliant with these frameworks help organizations achieve cybersecurity and hence lower their digital risk.
In this digital age, digital risk management (DRM) cannot be overlooked by any organization. This should be made a priority by the management teams, with the dawn of the impeding digital transformation. Digital Risk, like all risks, cannot be completely eliminated. But the impact of these risk events, which are ever increasing in businesses with time, can be mitigated with effective DRM. There are many incidents in the past which have made organizations aware of the controls that were needed to be placed on events which tremendously affected their business, for instance, a cyber breach or ineffective data management measures. Looking at them retrospectively, the loss incurred by those organizations, could have been reduced by placing appropriate controls, which is an integral part of DRM. Moreover, an effective DRM can also be leveraged to buy cyber insurance for your business. Now the question that remains to be asked is, “Why not pay more attention to digital risk“?
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