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I recently had the opportunity to be part of a series of panel discussions related to the management of risks within the realm of the new digital reality in which we find ourselves. Some of the questions posed were very interesting to stop and think through.
“How has digital transformation changed the role of risk management?” I started my career in the data processing arena - long before it became known at Information Technology. So, this transformation to a digital era has not necessarily caught me by surprise. As I stepped back to think about it, as well as the reality we are facing, I was amazed at how quickly this new digital reality has come upon us. I truly believe that the digital transformation is making nearly every risk professional pause and ponder how technology has become so pervasive – both from a business and a personal perspective. My answer to the question at the beginning of this paragraph would have to be that digital transformation is influencing every area of risk management, which in turn must guide leaders in the various risk arenas to work collaboratively, with respectful challenge in order to identify, develop, implement, and maintain the most effective controls.
Risks are coming at us from everywhere. “Where do you see the most pervasive risks at the moment?” As I am a firm believer in leading versus managing and teamwork versus only individual contributions, I feel that the biggest risk any organization may be facing today is “Be the smartest person in the room.” I consider this ideology to be poison and will not likely facilitate a culture that will effectively manage digital transformation risks, or any other risks for that matter. Collaboration is no longer just a wonderful idea…it is a necessity if we are going to truly be able to manage the risks that we face today, as well as the risks of tomorrow.
“Have we thought about from where the next generation of risks may coming?” This is a very interesting question to stop and contemplate. Does anyone have a crystal ball from which they can see into the future? I don’t. But, given the previous point about collaboration, I am a believer that we can accomplish more together than any one of us can individually! Technology dependence is certainly a risk that is right in front of our faces, which means that the digital transformations we’re experiencing today will grow and be more prevalent tomorrow. We don’t yet know the extent to which technology will cause or impact risks, or even to which we’ll be able to enable proper, effective controls.
“How do we implement “real-time” risk management? As I thought about this question, it let me to wonder whether the collective “we” are effectively managing risks, or are we instinctively reacting to them? The answer is not cut and dry. In some ways, “we” are effectively managing the risks…that we know about. “We” can identify, measure, and monitor the risks we can see…in front of our faces, as well as in our direct line of peripheral vision. Once these risks get outside of the direct peripheral view (more along the lines of emerging risks), we are much more challenged…but why? The thread of collaboration continues with this question. Since any one of us may be a generalist or even very specialized in only one or two risk areas, then the collective “we” can pool our experiences, our thoughts, and even some of our “wild ideas” in regard to identifying and managing some of the risks “we” may not immediately see…but sense are right around the corner.
A side note - I believe risk management professionals are going to have to adopt the convergence of business intelligence, machine learning, automated intelligence, and robotic process automation if weare going to truly realize “real-time risk management.” But, this will bring an entirely different perspective to that element of risk management called Model Risk Management…so be prepared!
At the end of the day, these are just my opinions. I believe it takes a village to manage risks! I have been grateful for those from whom I have learned many lessons…both good lessons and the occasional “what I should not do.” I would encourage each reader to consider a collaborative approach to each of your respective areas of risk. I do believe that as you process through the risks associated with this digital transformation we’re experiencing, “we” will bring forward a simple and efficient approach to effectively manage these risks!