The role risk managers must play in your digital transformation
DIGITAL transformation isn’t a race, but companies that pioneer the use of cutting-edge technologies gain a far superior competitive edge that those that just follow the market.
However, leaders must also bear in mind that there’s a great risk when the organization fails to successfully and seamlessly implement a new-age technology application it has been chasing.
Leading the digital transformation in an industry is therefore quite the balancing act, and organizations must learn to take smart risks when choosing projects.
According to a new PwC study, companys must consider elevating their risk management team to better evaluate and understand digital projects to ensure the right ones are picked.
Their study of 2,000 CEOs, senior executives, board members, and professionals in risk management showed that some of the best companies are already doing this.
“We are trying to enable the business to have enough data and information to make data-driven, risk-based business decisions eyes wide open, each and every day. To me, that is a smart risk taker,” said S&P Global’s Chief Risk and Audit Executive and SVP Nancy Luquette.
According to PwC, however, risk management teams must be digitally fit in order to provide the right guidance to their organizations.
Here are the five dimensions that risk management functions need to evaluate before they’re deemed fit to help steer the organization’s digital transformation strategy:
# 1 | Vision and roadmap
“Do the risk functions have a blueprint to guide their digital transformation that is aligned with the organization’s digital vision?”
Risk managers can only guide the organization’s choice of digital projects if they understand the company’s digital vision.
It’s why experts recommend that companies bring risk managers into the fold when discussing and strategizing about digital transformation.
Doing so is expected to ensure they’re able to better understand their own digital transformation needs as well as those of the organization.
# 2 | Ways of working
“Do the risk functions have the necessary skills and collaboration tools to work in agile ways across the lines of defence?”
In order to navigate the organization through the digital transformation landscape, risk managers must have visibility into what the various functions and departments are doing.
Further, risk managers need to understand how different divisions see themselves, their risks, rewards, and their resources — all of which can help better understand how new technologies can play a role in delivering better results across the organization.
If the risk management function isn’t able to collaborate, they’ll fail to flag the risks in time and provide insights to managers who need time to make alternative choices that provide them with better rewards (with lower risks).
# 3 | Operations
“Are the risk functions using data and emerging technologies to streamline operations?”
Risk management teams need to be comfortable with data. Not just financial data but operational data as well.
If they want to elevate their role to help the organization make better choices that entail lower risks and offer a higher chance of success, they need to understand the organization thoroughly.
Some experts even believe that if the organization was to create a digital twin to assess innovation risks, the risk management function would be best to run it — provided they understand data and are comfortable with simulations and analysis of that data.
# 4 | Services model
“Are the risk functions (1) creating new services for their stakeholders that support a more digital organization, and (2) delivering data and information to decision makers digitally?”
Risk managers need to be able to visualize how new services can help the organization if they want to help invest in new-age applications.
Further, they need to be able to create channels to communicate risk-weighted decisions to business heads.
Hence, experts believe that these are both areas that risk managers must play close attention to understanding and delivering on.
# 5 | Stakeholder engagement
“Are the risk functions engaging effectively with business leaders and board memebrs with regards to their organization’s digital initiatives?”
Last but not least, risk managers must be able to effectively engage with stakeholders across the organization.
In their role, they need to provide convincing arguments to help leaders sold the benefits of investing in a particular technology see why it’s not the best option given the risk exposures of the organization.
This is a tough role and requires not just good communication skills but also the ability to use data to tell a good story that explains the past, present, and future potential of technology investments for the business.
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