Digital Transformation in Business: Opportunities, Risks, and Risk Management Strategies

By Edward Millington

D

igital transformation has enabled businesses to compete globally, fostering innovation and growth and creating operational diversities – providing competitive business edges in highly competitive markets. With emerging technologies like Artificial Intelligence (AI), the ever-expanding technological edge has further enhanced efficiency, simplification, and thoughtfulness in products, services, and operations, thus paving the way for further progress and a promising future for boards and business owners, driving and expanding market share and capitalising on shareholders returns. Such characteristics attract trustworthy shareholders, business clients and consumers, propelling the company to significant financial attribution, market share and influence.

Although digital transformation in business opens up new possibilities and financial opportunities, it creates dangerous risks similar to cancerous growths in the human body, which can occur unknown for long periods of time before discovery. Like cancer, if these risks are not detected, assessed, and risk-managed early, they can lead to irrefutable business risks, which can ultimately impact the company’s viability and, most importantly, the trustworthiness of the company with its partners, clients and customers. Such resulting, specific sectoral business risks in today’s operating digital risk environment can be categorised as: Information Security Risk; Operational Risk; Financial Risk; Compliance Risk; Reputational Risk; Strategic Risk; Legal Risk (Civil Lawsuits); and Physical Security Risk.

The resilience of a business in today’s ever-changing operating environment primarily depends on the board’s or business owner’s risk awareness and the operating risk management maturity model level. Successfully managing risks necessitates implementing and operating an Enterprise Risk Management (ERM) program. The ERM program will enable the business to identify, prioritise, and manage risks that could potentially impact the company’s mission and vision, hampering its long-term success.

But what are these risks, or in fact, how have such risks come about warranting your full attention?

Digital Transformation (a data-driven mechanism) incorporates varying IT strategies and technologies, which enables the business to be agile through its product and services, operational efficiencies and diversities, by the utilisation of: Cloud applications and services; Automated big data platforms; Blockchain Technology; Internet-of-Things (IoT) devices and services; and AI and AI-based systems.

The utilisation of such digital technologies draws upon the organisation’s digital maturity, where overall governance, a top-down approach, affects the company’s IT governance program to safeguard its principal digital assets and valuable data. Data, which drives and enhances the digital transformation program, is at risk due to IT vulnerabilities that can be exploited by cybercriminals, causing grave business risks as previously mentioned.

How IT governance is applied and operated (maturity level) affects the security nature of the business in a few whelms in the information security model. Therefore, for a holistic approach to protecting and securing data – information security – the company’s security maturity is governed by its information security program that operates on the principles of developing governance, people, process and technology, and not technology alone – possibly making up 60-70 per cent or even more of the overall company’s concern when it comes to information security and who is responsible for it.

An Information Security Governance Program is a guiding document that strategically aligns the organisation, its people, process, and technology with the organisation’s vision, goals and objectives through security frameworks, policies, standards, procedures, and guidelines for securing business assets, keeping data secure and protected, creating and building data privacy.

It is important to recognise the security risks associated with digital transformation, as it can have significant implications for a company’s lack of due diligence and due care regarding the data it holds. Data protection laws and industry regulations require companies to be legally responsible and accountable for the safety and security of the data they hold within their boundaries. The company risks legal liability and significant business risks in the event of a data breach. Moreover, the company can also be held liable if its networking infrastructure, solutions, or services are used as a vector in a cyber-attack against other businesses, partners, or clients, resulting in irreparable damages and losses.

In the contemporary business landscape, boards, business owners, and senior executives must understand information security risks well. This awareness can facilitate responsible governance across all company levels, ensuring that sensitive data and proprietary information remain secure and protected from potential breaches and other data risk activities affecting its confidentiality, integrity and availability. As such, they must take steps to mitigate information security risks and safeguard their operations against the ever-present threat of cyber-attacks and other malicious activities. By doing so, the company (de-facto the board, etc) can promote a culture of security and accountability, instilling confidence in shareholders and engendering trust among partners, clients, and customers alike, as it seeks greater financial opportunities in varying and expanding markets.

Edward Millington, an Information Systems Security, ICT and Telecommunications veteran, is the founder and Managing Director of the Cyber Security and Management firm Carisec Global Inc.

Edward Millington, an Information Systems Security, ICT and Telecommunications veteran, is the founder and Managing Director of the Cyber Security and Management firm Carisec Global Inc.

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.