Four factors for bridging the gap between digital transformations and corporate risk management
Given the criticality and level of investment involved with digital transformation programs, it’s only a matter of time before good management teams ask:
How do we control the risks associated with our organization’s digital transformation?
On the surface, it may seem that the risk-taking associated with digital transformations is at odds with the well-established mindset of risk-aversion present in many organizations. But with the right structures and approaches to de-risking, your organization’s digital ambitions and its corporate risk management program needn’t ‘pull in opposing directions’.
De-risking a digital transformation is necessary to protect the operational side of the organization from threats and also to foster value; and in the process, ensure the viability of the transformation itself. It’s our observation that even the most capable and well-intentioned corporate risk teams are rarely equipped or resourced to achieve these outcomes.
There are four factors that make it challenging for corporate risk teams to address digital transformations like they would other corporate risk categories.
Risk awareness: Risk awareness is a key part of effective risk management. Given the dynamic digital landscape, keeping abreast of associated risks is difficult – specialist knowledge and experience across a broad array of transformations is required.
Tolerating risk: Transformations are enabled/progressed by findings resulting from carefully designed ‘experiments’ (also called organizational learning). For example, these findings may include determining what customers want or testing the integration of new digital solutions with legacy systems. Tolerance of certain risk-taking activities involves careful orchestration to ensure that associated investments are linked to value creation and critical risk controls necessary for the day-to-day functioning of the organization are maintained.
Risk management culture: Digital transformation teams are typically made up of people across organizations. It’s important therefore that this diverse group foster a risk management culture so not to unnecessarily expose their organization to risks.
Financial risk: In order to keep a digital transformation funded it must prove its worth. For this reason, digital transformations must be able to demonstrate a structured approach to delivering value for any associated financial investment. In this context, de-risking digital transformations involves fostering value and demonstrating the effective use of funds.
In most organizations, we observe a gap between what corporate risk programs are equipped to provide and what digital transformations require. With the right assistance to establish capabilities to address the four factors we’ve described, any organization can de-risk its digital transformation with confidence.
Human Sparks’ de-risking digital transformation service enables organizations to explore their digital aspirations while addressing risks. Working alongside digital transformation and corporate risk teams, we bring structured processes, our digital transformation risk and control library, digital transformation risk management software platform, expertise across the organizational pillars of people, process and technology, industry knowledge and an experienced team.
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