Digital transformation means significant benefits and critical risks

Digital transformation means significant benefits and critical risks. Like any medicine digital transformation has good effects and side effects.

Many consider digital transformation as the way to address all productivity and margin challenges. In other words, the way to deliver significant bottom-line value.

However, a recent EY’s global report ‘The digital disconnect: problem or pathway?’ points to some significant disconnect insofar there is a lot of talking, but not many actually embrace the new ways of digital transformation (DT).

The same report details some common pitfalls that are slowing the adoption.

Digital transformation means significant benefits and critical risks

Below we will review and draw parallels with slow or inefficient adoption of risk management (RM), draw some conclusions.

Perception of high costs

This is certainly a common point for digital transformation and risk management.

Everyone is concerned about Return on Investment (R.O.I.). In the case of digital transformation the concern is amplified by some well known over-promise and under-deliver case histories. In the case of risk management the general concerns come from fuzzy risk assessments, useless updates. Both risk management and digital transformation projects can be kept under control and discipline… it is a matter of good management.

Lack of education and understanding

Anything new generates fear and aversion to change if education, which generates understanding, does not shore implementation. However, there is always enthusiasm around “the new toy”, the new technology and the prestige it gives to its “owner”.

That’s probably why, like in many projects, people rush into implementation without developing a risk assessment, one that looks at the business as a whole, not a siloed one, and shows what could happen to the “owner” once the digital transformation radicates in the guts of their production and logistic systems, for example.

Lack of detail on the implementation pathway

Again, “new toy” enthusiasm pushes to fast track implementation while forgetting important details related to system interdependencies, etc.

It is vital to clearly understand the existing system, including all its likely non optimized partial digital solutions before slamming in a brand new digital transformation program which will end up in conflict from day one, starting an endless line of costly patches.

Poorly defined business model and business case

Like in Risk Assessments, a fundamental step lies in defining from the beginning and very clearly the success and failure criteria of the digital transformation.

Digital transformation means significant benefits and critical risks that need to be laid out very clearly, properly communicated to avoid skepticism and refusals.

Unclear accountability and siloed approach

Digital transformation will often link several departments in order to maximize its benefits. Digital transformation developing vertically, i.e. in a siloed approach to a department, for example, brings limited benefits.

However, as soon as the digital transformation also develops transversely, the effects of malfunctions, cyber attacks, etc. become complex, interdependencies surface.

The risk management approach has to be holistic, cover the whole system and converge all hazards (natural, technological, cyber, etc.) in one approach.

Quality of data

Data will generally be missing. It becomes important to be able to integrate various sources while understanding their different levels of content details, their uncertainties.

This is particularly important in face of climate change and other sudden alterations. Well developed risk assessments using all those pre-existing information should suppport digital transformation.

Closing remarks

From our point of view, digital transformation is not so different from any other major project.

It requires a disciplined holistic approach to risks from pre-feasibility on.

Contact us to know more.

Tagged with: critical risks, Digital transformation, Risk Management

Category: Consequences, Risk analysis, Risk management