The evolution of technology has left an impact in all areas of our lives, from household maintenance to running a business. Risk management is one of the most influenced aspects of business by technology. It is now mainly based on data, and each day, information technology facilitates the automation of the processes, beginning with risk identification and ending with monitoring.
Various technologies are used in risk management, such as Big Data, analytics, cloud computing, mobile applications, and governance, risk, and compliance (GRC) systems. Even applications like Microsoft Excel can also track risks, especially in startups.
And of course, there are well-known and reputable GRC systems, such as ServiceNow that specializes in risk assessment, among other factors in Enterprise Risk Management. These available technologies show that no business today should still rely on manual procedures to identify and mitigate their risks.
That said, let’s run through the different ways technology is changing risk management.
Startups usually utilize social media the most the monitor customer service and product or service quality. Facebook, Twitter, and Instagram are three of the most widely-used social networks where businesses build their identity and reputation. It is where they can track down and leverage user-generated content, which are posts made by customers describing their experience with a business. This type of content gives businesses insight into their customers’ perceptions of their products or services. In turn, they can put potential reputational damage under their control, before it starts to cause serious issues in their brand or franchise.
Data Integration and Analytics
Many businesses possess a huge database, managed by IT departments, and integrated with better applications to maximize the values of their investments. Databases usually have risk data points that can be “mined” by more powerful computing platforms, such as electronic data warehouses (EDW), Big Data, Business Intelligence, and information-analytical technologies.
Powerful data extraction, transformation, and loading (ETL) technologies can be integrated into those tools so that the IT can also extract the values of hard-to-locate data.
Meanwhile, Big Data Analytics can aid in many areas regarding Market Risk Analysis. Such are the following:
- Preventing and reducing incidents of fraud
- Credit management
- Identifying acts of money laundering in real time
- Market and commercial loans
- Operational risks
- Integrated Risk Management
In addition, the data “mined” by the powerful computing platforms allow businesses to predict the failure of their machinery and equipment, and their profits. When combined with other data mining tools, businesses can also analyze trends and thus predict them.
As technologies continue to evolve, the schemes and tactics of hackers also improve. But with advanced cybersecurity systems, businesses can reduce the risks of data theft.
There are many cybersecurity companies that risk managers may consider. They periodically publish the latest threats, malware, and system breaches. As such, risk managers will gain a more thorough understanding of the risks that may arise with technology.
Risks in a Technology-Driven Business
Though technology has significantly reduced the risks in a business, it also cultivated new ones, including cybersecurity breaches. As technology advances, the nature of security risks also develops continually and becomes more threatening. Hence, businesses have to constantly invest in data security, as well as other computing platforms to protect their data. These racks up their expenses, so all businesses, whether startups or corporate giants, must always compare costs and benefits first before committing to a specific data protection app or computing platform.
Technology also tends to increase the costs of training, because technological upgrades always involve a new way of doing things. As such, businesses need to re-invest in training periodically. But the expense can be eliminated with a competent IT team who can train risk managers and other staff on all things tech-related.
But this other risk tech-driven businesses face may always be present: tech dependence. Meaning, as a business grows more dependent on tech, the more likely it’ll stop functioning in the event of glitches, bugs, and power outages. Their productivity relies primarily on the availability of technology, driving them practically powerless without it. Hence, risk managers should also come up with a plan that will enable businesses to continue operating even with limited technology.
Such a plan, called a Business Continuity Plan, will help businesses survive a disaster, such as hurricanes, fires, or earthquakes. It involves ensuring the safety of all personnel, the preservation of critical business equipment, and the maintenance of a sufficient income stream.
At the end of the day, though technology can replace almost any human task, it is not invulnerable and foolproof, so businesses must always have a back-up plan should their systems fail. But despite the little catches in technology, it’s still the reason we can reach out to a market easier, and prevent the risks that will potentially harm our businesses.