Digital Transformation Risks

Digital Transformation Risks

By Cumhur Bilgili, Director, Risk Management, Kibar Holding

Cumhur Bilgili, Director, Risk Management, Kibar Holding

Risk is an integral part of the digital transformation process. It is recommended that organizations incorporate the risk management perspective into the digital transformation process through all stages of planning and execution.

Proactive risk mitigation becomes a higher priority as organizations progress towards digital transformation. As leaders manage their priorities in terms of security, skills and operational efficiency; they are becoming more effective in spreading risk mitigation practices throughout the work.

The four approaches to risk management of digitally successful companies are:

• They give up the risk aversion tendency.
• They accept and take responsibility for their risks.
• They strengthen their understanding of risk.
• They monitor each risk individually.

In order to evolve from a risk-avoiding organization to an acknowledged risk-taker one, business leaders need to act more courageously to promote a culture that allows experimentation without fear of failure.

Transformation leader needs to ensure that the right capabilities are used to manage key sub-components of transformation such as innovation, governance, program management, organizational change, and technical project management. However, the issue of providing a “technical project management” often outweighs other issues. This can be considered as a major deficiency in many digital transformation initiatives today.

In digital transformation, technical risk management can be divided into three main areas:

• Data security
• Proactive risk reduction and threat prevention
• Impact of system and infrastructure reliability

Efficient management of risks related to cyber security, data privacy and system reliability is decisive for the success of digital transformation.

The risk objectives for digital transformation projects can be outlined as:

• Security of customer data
• Security of internal data
• Encouraging proactive risk reduction efforts

Organizations that have taken the lead in the digital transformation process are more inclined to work with thirdparty service providers than those at the beginning of this transformation. As digital maturity develops, it is observed that the value given to external expertise increases.

In the journey of reaching those risk objectives, it should also be noted that compliance and security are not the same things. While compliance corresponds to a number of slowly changing needs, the security issue is related to daily changing needs. In order to protect sensitive data, organizations need to have a well thought out and comprehensive security plan, backed by a sound compliance plan. The most common risks in digital transformation process can be summarized as below :

• People in the company is not convinced that it will no longer be the same
• Failure to communicate the vision for the future so clearly as to have an emotional impact on people
• Digital projects do not appeal to a wide audience and are not suitable for the current organizational culture.
• The senior management team is not in the same perspective as the transformation and does not provide full support
• Lack of experience and knowledge of the transformation sponsor and / or leader on conversion management principles and best practices
• Difficulty of bringing key team members from a slower and more stable mode of operation to a transformational mode of urgency
• Inadequate transformation administration to ensure that information-based decisions are aligned with the pace of transformation
• Lack of accurate information to monitor outcomes, identify and manage risks before causing serious problems
• Inadequate addressing of organizational barriers such as culture, structure, capabilities and policies to achieve the full value of transformation
• While projects are supported by a sound and agile project management approach, lack of such an approach in comprehensive transformation.

In summary, the success of digital transformation depends on clear understanding of the objectives by all stakeholders, integration of changes into corporate culture, ongoing support by the senior management, strong cooperation between function leaders and effective project management structure. 

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