18 Oct Risks and transformations: the key risks to identify
Most transformations are undertaken without any formal way to capture and manage the associated risks, according to McKinsey (2021). Many projects have minimal controls designed into the new processes and underdeveloped change plans or none at all. Often scant design inputs from security, privacy, risk and legal teams are part of the digital transformation landscape.
As a result organisations are creating hidden non-financial risks in cybersecurity, technical debt, advanced analytics, and operational resilience, among other areas.
The COVID-19 pandemic and the measures employed to control it have only exacerbated the problem, forcing organisations to innovate on the fly to meet work-from-home and other digital requirements.
McKinsey recently surveyed 100 digital and analytics transformation leaders from companies across industries and around the globe to understand the issue’s scope. While the benefits of digitisation and advanced analytics are well documented, often, the risk challenges remain hidden. Several key findings emerged from the survey:
- Digital and analytics transformations are widely undertaken now by organisations in all sectors – it is a source of strategic go forward.
- Risk management has not kept pace with the proliferation of digital and analytics transformations. A gap is opening that can only be closed by risk innovation at scale.
- The COVID-19 pandemic environment has exacerbated the disparity between risk-management demands and existing capabilities.
- Most companies are unsure of how to manage digital risks. Leading organisations have, however, defined organisational accountabilities and established a range of effective practices and tools.
What are the key risks to look for in your transformation?
Soft factors like skills, mindsets, and ways of working, as well as hard factors like technology, infrastructure, and data flow remember, are all being changed at once during any transformation.
Can your people keep up?
Have you set your people up to fail with your transformation?
Digital transformations mean more projects. Some traditional risks are more common to most projects, including the usual suspects that arise from budget and schedule overruns, talent and employees, third party issues regarding contractors, suppliers and partners, IT performance measured before and during the change, in addition to compliance and regulatory issues. Yet digital and analytics transformations also introduce new cyber-risks, data risks and emerging risks from artificial-intelligence (AI) applications. Digital and analytics initiatives require more detailed data to be collected from a wider range of sources. These data sets are then used in different parts of the organisation to generate insights.
What sort of insights are you looking for from your data?
The moving of data and the data sets created carry inherent risks then also in data availability, location, access and privacy.
Risk, Data and Data Protection – Backups?
Sources of risk to operational resilience include new IT services and migration to the cloud. We have all experienced this change with our “Cloud First” Strategies. Who has your data encryption keys? Your data is not protected by your cloud provider hence the number of ransomware and hacking occurrences of late. Here is a large legal liability or reputational risk to your organisation and it is real and now. If ignored or not handled appropriately, this risk leads to expensive mistakes, regulatory penalties and community backlash.
Who wants more social media grief?
Finally, the day to day operational or business disruptions caused by the COVID-19 crisis have compounded these additional risks and the layers of complexity they can promote. Historicallyl, the pandemic has probably set off the largest wave of digital and analytics transformations in history. The result is that we are seeing a compression in transformations that would have taken years into a few hectic months or even weeks, often with little advance planning.
We can help – with insight and hands-on expertise
Strategic Directions have been helping organisations to align their strategy and providing tools and people to help change and transition to performance. Don’t take our word for it. Be sure to call and ask to speak to one of our clients. We would be glad for them to tell you how we do it better.