The New Riskonomy

Section 2:
Organisational vulnerabilities

C-suite and GCs believe their organisation’s internal processes and systems present the lowest level of technology risk, despite three of their top four concerns being internal challenges. Are business leaders miscalculating the risks associated with data management, digital skills gaps and misuse of generative AI, or is their confidence boosted by the perceived level of control they have over internal operations?

Riskonomy radar reading

Our Riskonomy Radar indicates that 74% of organisations are in the moderate or high risk range when it comes to managing their exposure to tech risk in internal systems and processes. This suggests that, although many business leaders may be cognisant of internal vulnerabilities, there is considerable room to revisit and improve current practices.

Key sources of internal risk include (but are not limited to)

Poor data management

Lack of employee training and digital skills

Insufficient policies relating to new technology and outdated technology

11%

High
risk range

63%

Moderate
risk range

26%

Low
risk range

C-suite and GCs admit that, when it comes to their data management capabilities, their organisation reviews relevant policies just once a year (41%) or does not carry out regular reviews (8%). And more than half only undertake an internal audit of their data management capabilities once a year (51%) while a further 11% do not perform an audit regularly.

Updating and reviewing relevant data management policies to keep up with changing legislation and best practice can be time-consuming and costly. However, as seen by the penalties for data privacy violations, neglecting to maintain hygienic practices can leave businesses open to more severe financial consequences. Organisations also risk lasting reputational damage, both with existing customers and with the wider public.

Expert perspectives

Where does your organisation sit in Gartner’s Data Governance Maturity Model?

9%

Effective

Utilising data and managing information is seen to provide a competitive advantage. The team responsible for data management is well-established and active.

13%

Managed

Data policies have been developed, initiated and are well understood. Data metrics are well-defined and accessible.

22%

Proactive

There is company-wide compliance with governance protocols. Data stewards and owners are identified and active.

20%

Reactive

Data quality processes are reactive. Policies have been created, but adoption is low.

27%

Aware

There is an awareness surrounding the need for standardised data policies and processes, but no clear ownership.

8%

Unaware

There is no data governance, data ownership, or accountability in place.

Expert perspectives

Repositioning for success in a digital age

As the war for talent intersects with advancements in technology, it’s not surprising that two-thirds (66%) of C-suite and GCs distinguish digital skills as being important to their business strategy, and that a digital skills gap is the third-top concern related to technology-associated risk.

In today’s digital world, digital literacy and digital security awareness are essential skills, and there is a growing demand for competencies in coding, digital marketing, digital ethics, data literacy, cloud computing and AI. Across sectors, GCs and C-suite leaders believe that, on average, a fifth (21%) of their workforce does not currently have the digital skills to support their business strategy.

There is a strong relationship between those who identify digital skills as important to their strategy and those who think 20% or less of their workforce don’t have the skills required. C-suite and GCs are concerned about the biggest skills gap in their organisation belonging to IT (29%), marketing (21%) and sales (16%), while only 6% believe their legal department has the biggest skills gap.

Despite the technological focus of the new riskonomy, businesses still depend on people. Securing the digital skills that are most in demand – whether through recruitment, upskilling or acquisition – remains a crucial piece of a successful corporate growth strategy.

In which department in your organisation do you currently have the biggest skills gap?

Expert perspectives

The AI stalemate

Generative AI has the world on the cusp of systemic change. Content creation, medical imaging analysis, financial forecasting, product design and virtual customer service assistants are just some of the everyday touchpoints now being populated by virtual minds.

Allowing machines to carry out repetitive or technical tasks unlocks previously unimaginable efficiencies, releasing human experts to focus on complex and creative problem-solving. But legal teams need to be prepared for a new set of liabilities around ethics challenges, IP rights violations, data protection and factual inaccuracies.

A challenge of employing a digitally literate workforce is governing the use of new technologies while the respective risks and rewards are still being understood. Over three-quarters (78%) of C-suite and GCs say their organisation allows employees to use generative AI in their daily work. Almost two-thirds of these (62%) permit the use of publicly available generative AI tools, while 38% restrict employees to a bespoke generative AI system.

Expert perspectives

AI in the sky

Generative AI has been a central focus for many businesses even before the release of chatbots like ChatGPT. The technology relies on algorithms that allow users to generate outputs in the form of text, images, audio and video. In recent years, generative AI’s commercialisation has led to democratised access, allowing a wide range of people across different industries to take control over fast-paced innovation and productivity with no technical experience.

However, despite the positive impacts of the technology becoming more accessible, it also poses more business challenges around ethics and data security. It is for that reason that some firms have decided to embark on exploring more bespoke generative AI solutions – with many, opting to take advantage of retrieval-augmented generation (RAG) tools that provide a safer way for employees to both take advantage of advanced large language models.

Expert perspectives

Sustainable innovation: playing to win

Although emerging technology has its risks, investing in its future also creates opportunities. For example, although blockchain can introduce regulatory uncertainties around data privacy, it also provides enhanced security and transparency, and reduces the likelihood of being a target for cyberattacks.

Blockchain is a type of distributed ledger technology; a decentralised digital record of transactions across multiple computers, that provides transparency, security, and immutability without the need for intermediaries.

Financial services firms are leading the way with the use of this technology, being the most likely to be use blockchain (60%). Sectors falling behind with leveraging the technology were transport (25%), energy (26%) and manufacturing (33%).

With growing digitalisation in the financial services world, the industry is continuing to look for ways to instil greater trust and security – especially with the rise of digital currencies. Blockchain investment is already helping financial services firms to simplify compliance procedures, whilst providing tamper-proof records that reduce the risks of fraud and cybercrime.

Sector spotlight

Transparency and trust in transactions

Digital twins are another emerging technology with great potential for driving efficiencies. These are like-for-like virtual models of real-world products, systems or processes, created for testing scenarios and gathering data. Although digital twins can introduce vulnerabilities to data breaches or privacy violations if not securely implemented, they can enable predictive maintenance, optimise operations, and simulate scenarios for risk mitigation.

Although only 18% of business leaders say their organisation is currently using digital twins, 38% say their organisation is looking to invest in the technology, particularly for ESG purposes.

Leveraging virtual models presents significant opportunities for businesses to simulate real life scenarios that can provide essential, actionable insights. Business leaders recognise this; despite digital twins only being put to limited use at the moment, leaders in several sectors identify the technology as a key focus for future investment.

Currently, almost a quarter of those in the energy sector (23%), 21% in manufacturing, and 20% in life sciences are using digital twins. At the same time, 46% in manufacturing are looking to invest in digital twin technology to meet their ESG goals in the future, alongside 48% of leaders in tech and telecoms.

The least likely users of digital twins are in the transport sector, with only 12% saying that they use digital twins to help meet their ESG goals. And the data highlight that it’s unlikely that these organisations will be adopting the technology any time soon too, with only 27% expecting to focus on using the technology more in the future.

Sector spotlight

Investing in the future of emerging technology

Expert perspectives