How Digital Disruption is Affecting Risk Management
How much computing power do you carry with you? Between a smart watch, your phone and the tablet computer you can slide easily into your bag, you probably walk around with more computing power than the first space rockets.
Digital disruption is the idea that technology is bringing about significant change in the way people work together and to how businesses operate. Products and services are fundamentally affected by technology. The highlight of my week as a child was going to our town library, and joining a queue to slide my books along the wooden shelf to be stamped and issued by the librarian. This week, I returned and issued my own books at the kiosk in the library. There are still librarians in evidence, but their roles are different, and stamping books for kids who are trying to stay quiet is no longer one of them.
Business that do not adapt to the ways of digital disruption will find themselves struggling in their marketplaces and ultimately at a competitive disadvantage. The expectations are that some firms will fold – and some already have – because they are unable to keep up with what is required to operate in this new economy.
So what does this mean for businesses of all kinds dealing with risk? Let’s take a look at the areas most affected by digital disruption and what impact that could have on project and risk professionals going forward.
Becoming More Trusted
Trust is a huge area being affected by shifts in the digital economy. Whether it’s through news reports or review websites, never before has it been so easy to find out what other people think of your organization. Reputational risk is often high on the agenda for new and innovative projects, but also for those projects that tie up large portions of your assets or that have a significant impact on those around you.
Think of a construction project in your local community: you’d want to think that the development company was trustworthy and that they were acting with fairness and transparency. You’d want to trust that their development was going to fit into the local landscape and be an asset to your community. You’d want to trust that if they said the housing development would come with an additional school, medical facilities and green space that they would actually follow through.
As the organization responsible for the delivery of projects that have an impact on your community – however you define ‘community’ – people expect this of you, too. Good risk management is a way to ensure that you gain and maintain trust. That goes for your employees, contractors, suppliers and ultimately customers.
Trust is hard-won and easy to lose, so reputational risk should not be underestimated. Consider including it as a de facto risk in all your consumer-facing projects.
The Rise of AI
With more digital processing power, artificial intelligence has a huge part to play in how business processes are run. We have the option to digitize more and more. There’s value in that: it frees up your expensive and expert resources to do value-added work instead of some of the more laborious tasks that fill time but don’t make best use of their skills.
There’s also value in mining data repositories for better management information about risk. Think of all the data you collect on project and corporate risks. Could your Project Management Office use that to predict what risks are likely to materialize on your next projects? Could that data help predict what risk mitigation activities are likely to give the best results for the least cost, based on what’s happened on projects over the last few years? Could they flag up the people who are worst at estimating the impact of risk in your business, so that other experts can take a second look?
There is huge potential for big data processing and algorithms that help sift data into a format that managers can use to their advantage.
Some of the applications of AI and advanced technologies sound scary, but we may as well get used to them: the more we can understand and experiment with this kind of processing power, the easier it will be to harness it for competitive advantage in risk management.
Many businesses like to say that they are innovative, while in reality still churning out three-year plans with heavy governance, stifling new ways of working.
Digital disruption provides the opportunity to change that. Within risk management, technology can mean access to faster ways of addressing risk. There are more options available for risk mitigation than before, because it’s easier to work in innovative ways, collaborating with third parties to jointly address concerns before they become problems.
We can see this in risk management governance structures where cross-functional teams take ownership of risk on major projects and programs. Innovative approaches rely on multidisciplinary intervention and thinking that goes beyond the confines of an individual department.
The Power of Community
A key tenant of the digital age is the ability to connect with others. Whether it’s your internal corporate social network, or a public network, we have more opportunities than ever before to connect with customers, suppliers and colleagues. They provide a platform for listening to our communities – and that’s an excellent way of identifying new and emerging risks.
Equally, networks allow us to stay in touch with the industry in a way that was previously only available by attending professional conferences at great expense. How many webinars have you been invited to recently? Whatever your area of professional focus, there is a community out there waiting to connect with you.
Digital disruption is something all businesses are facing. Those who succeed will be those who look at new technology as an opportunity to improve. Risk management is a tiny part of what is changing as a result of major cultural shifts in how businesses and consumers interact with technology, but it is certainly something to be aware of as we head into the future.