As companies shift to a digital workplace, becoming increasingly dependent on technology, their susceptibility to digital threats grows. But how do you manage digital risk and what exactly is it?
What Is Digital Risk?
Every new device or software added to the company’s infrastructure introduces vulnerabilities—digital risk—that can cause disruptions. Digital risk is therefore embedded in the adoption of new technology solutions and digital transformation.
There are many types of digital risks. Below, we present those related to the adoption of technology to boost operational efficiency and streamline collaboration. It’s important to keep in mind that these digital risks are inherent to every industry.
To decrease the severity of these digital risks, companies must understand the possible consequences and exposure levels associated with digital transformation.
Types of digital risks:
With the growing reliance on technology to support a remote workforce, cyberattacks are bound to increase. As digital assets are moved away from internal networks and employees connect externally to the company’s digital environments, unauthorized access to sensitive company data then increases rapidly.
The expanded attack surface can then result in social engineering and software vulnerabilities, among many others (internal link to Addressing Cybersecurity Post-Pandemic).
As companies embrace software solutions to digitize operations, they risk losing control of data to third-party providers. Consequently, every additional third-party vendor expands the risk surface.
The key areas to consider when integrating third-party solutions are data sharing and data ownership policy, cyber resilience of the vendor, and compliance with laws and regulations.
Government regulations in many countries require companies to adopt solutions that comply with rules for data retention and other technology laws. In case a company implements a software solution that breaches these laws, there can be severe financial consequences and possible litigation.
Technology helps companies and employees boost productivity and increase the quality of output. However, technology solutions can also be a source of digital risk. The potential unavailability of critical systems due to power failures, dependencies, or incompatibilities can directly impact business processes and employees, effectively halting operations.
As employers, companies have to be able to protect sensitive data of staff. At the same time, companies have to make sure customer data is managed properly. Failing to ensure data safety for critical stakeholders can then result in numerous problems ranging from costly litigation to negative publicity.
While spurring growth and saving time, automation also has a negative side to business processes. For example, many automation solutions can introduce software incompatibilities or add a level of redundant operational complexity.
Furthermore, AI-based automation tools can create risks often difficult to predict long-term.
How to Manage Digital Risk?
To manage digital risks, companies should strategically identify key assets and analyze how those assets impact business operations in both the short and long-term. They should scrutinize every asset added to the infrastructure for a possible increase in risk and expanded attack surface.
Identify and Analyze Key Assets
Firstly, ask the question: What kind of vulnerabilities and exposures do key assets create within each risk type?
Sample key company assets:
Customers and employees—How do you protect their data? How is the data handled? Which online assets contain sensitive data?
Technology—Do you have backup solutions in case of power failures? What if a component becomes unavailable? In that case, can you maintain operations with parts of your core setup disrupted?
Software—Are all third-party apps in active use, updated, and patched? Is connecting through a VPN mandatory for all employees? Do you have obsolete and unused software containing data that could be exploited?
Introduce Risk Mitigation Steps
- Remove software redundancies with any possible vulnerabilities that could be exploited or generate excessive costs.
- Establish security policies and tools (VPN, antivirus, firewalls, employee training).
- Develop an actionable response framework with backup solutions for managing disruptions.
- Create risk and threat models. Include every critical digital asset. Put special emphasis on companies across the supply chain, third-party vendors.
- Build a robust reporting policy to aid employees in signaling suspicious activities, emails, etc.
- Add every new technology solution gradually, putting compliance, security, and interoperability top of mind.
Monitor Your Efforts and Adjust Actions Accordingly
Managing digital risk successfully is an ongoing effort. The digital environment is a fluid one, prone to fluctuations that can render preventive strategies useless if they aren’t adapted to the regularly collected insight.
That’s why then there should be a continuous review process in place. Organize frequent meetings with senior management and key IT staff to update policies as the situation evolves and the infrastructure changes.
Keep Digital Risk Low
By digitizing operations, companies expand their risk profiles, introducing new potential disruption vectors. However, for every new digital risk, there are mitigating and management practices that help decrease their severity. Constant assessment and conscious analysis of digital solutions can aid in the implementation of preventive measures that successfully curb potential consequences.
Use our guide on developing a business continuity plan for asset discovery and risk assessment.