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Risk Trends in 2024 and Beyond: Digital Transformation

Risk Trends in 2024 and Beyond: Digital Transformation

Synopsis
4 Minute Read

The COVID-19 pandemic forced many companies and governments to accelerate their digital and cloud transformation plans.

For many, implementing new platforms has introduced new risks and vulnerabilities and shifted overall perspectives on risk management. Organizations need to consider how these changes have impacted not only their tolerance for risk but also their strategy, business model, and human resourcing requirements.

They also need to ensure the proper policies, procedures, and risk assessments are in place to support the safe and effective implementation of new technologies.

This insight is one of 15 risks in our 2024 Risk Trends Report. Navigate back to the main page for the full list of risk trends that you should be monitoring for in the year ahead.

Have you envisioned the opportunity and risks of the end state?

The pandemic forced many companies and governments to expedite long-term digital transformation plans. Cloud-enabled capabilities have been a common feature among transformation initiatives to accommodate enhanced e-commerce and the needs of a remote and geographically dispersed workforce. The cloud has also found its way into advanced hardware as organizations seek more data on (and how to improve the performance of) physical systems.

While many new platforms seek to replace aging and outdated infrastructure, it would be short-sighted to treat these upgrades as like-for-like replacements. For example, a cloud enterprise resource planning platform can perform many of the same functions as on-premises accounting software, but it also introduces new processes and risk exposures.

Each cloud update introduces a new potential point of entry for cybercriminals and adds to the organization’s overall third-party risk calculus. Relying on default user access settings can also increase the risk of insider threats, while poor or incomplete training can diminish data quality and the resulting return on investment. These side effects exist throughout the digital transformation value chain and compound with each new platform that is introduced.

Introducing new software may also require updates — not just to hardware or other supporting infrastructure to ensure it is secure and operates as intended, but also to support integration with remaining legacy systems.

Moreover, it is necessary to review related policies, procedures, and risk assessments that govern the use of technology and update these as required. Digital transformation can also have a material impact on an organization’s strategy, business model, and human resourcing requirements — creating an increased need for specialist knowledge in some areas and making other roles redundant.

Related risks

  • Cybersecurity threats
  • Data privacy concerns
  • Integration complexities
  • Dependency on technology providers
  • Cost overruns
  • Resistance to change
  • Skills gap
  • Regulatory non-compliance
  • System downtime
  • Lack of digital transformation strategy
  • Data quality issues

"" Key questions to ask

  • Do you have an inventory of all the planned changes and changes already made related to digital transformation?
  • Have the integration requirements with legacy systems been identified and assessed?
  • Post digital transformation, do you know what controls, policies, procedures, training materials, and job descriptions need to be updated to remain effective and relevant?
  • Will your organization need added resources with new capabilities to effectively and efficiently use the new technology?
  • How much training will employees need to use the new technology?
  • Has the number and types of cyber attacks changed since your digital transformation started?
  • How will you determine whether the intended benefits from the transformation were realized and whether there are any lessons to be learned?

"" Red Flags

  • Increased number or complexity of cyberattacks
  • Evidence of unauthorized access to systems and access to data
  • System failures or downtime
  • Data inaccuracies and reporting errors
  • Excessive costs and services required
  • User complaints
  • Training, policies, and procedures out of date

Internal Audit Project Opportunities

Project Management Audit
This audit assesses the planning, execution, and control of the digital transformation project. It ensures that project management practices are in place, timelines and budgets are adhered to, and potential risks are managed effectively.
Technology Infrastructure Audit
This audit evaluates the organization's existing technology infrastructure and readiness to support the digital transformation initiatives. It examines factors such as scalability, security, data storage, and network capabilities.
Data Governance and Management Audit
This audit reviews how the organization collects, stores, processes, and protects data during the digital transformation. It ensures compliance with data protection regulations and assesses data quality and integrity.
Cybersecurity Audit
This audit examines the organization's cybersecurity measures and evaluates the robustness of its defences against cyber threats, especially as new digital solutions are implemented.
Vendor and Third-Party Management Audit
This audit assesses the selection and management of third-party vendors involved in the digital transformation project, ensuring that they meet security and compliance requirements.
Change Management Audit
This audit evaluates the change management strategies used during the digital transformation to assess the impact on employees, identify potential resistance, and ensure effective communication.
User Experience and Customer Journey Audit
This audit reviews the user experience design and customer journey for digital products and services, ensuring they meet the intended objectives and provide a seamless experience.
IT Governance Audit
This audit assesses the governance structure for IT decision-making and the alignment of digital transformation projects with the organization's overall IT strategy.
Compliance and Regulatory Audit
This audit ensures that digital transformation projects comply with relevant industry regulations, data protection laws, and other legal requirements.
Training and Skill Development Audit
This audit examines the training programs and skill development initiatives put in place to equip employees with the necessary capabilities to adopt and leverage digital tools effectively.
Return on Investment (ROI) Audit
This audit assesses the financial performance and ROI of digital transformation projects to determine their impact on the organization's bottom line.

Risk Trends in 2024 and Beyond

View all the risk areas featured in this year’s report.

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