2021 is shaping up to be a transition year as economies recover from COVID-19. The pandemic had a beginning, and it will have an end. While we endure this pandemic, artificial intelligence, machine learning, predictive analytics, and the commercial applications of these emerging technologies keep opening doors of opportunities. As organizations explore and adopt these emerging technologies as part of their innovation strategy, what are some of the risks they face?
Based on conversations with executives in financial services, banking, and insurance, three come to mind: overcoming the dependency on legacy systems, putting into place supporting business practices, and mitigating cybersecurity threats.
“Managing innovation will increasingly become a challenge to management, and especially to top management, and a touchstone of its competence.” Peter Drucker
Overcoming the dependency on legacy systems
Gartner defines a legacy application as “an information system that may be based on outdated technologies, but is critical to day-to-day operations.” Some organizations with legacy applications in place hamstring their efforts in adopting emerging technologies by creating a dependency on upgrading their legacy architecture.
The nature of emerging technologies is that they do not always need legacy systems to upgrade. Many can be customized with drag-and-drop components. As long as the information can be securely passed from legacy systems to new technology platforms promptly, the adoption of emerging technologies can continue. Where timeliness is an issue, proxy information can be tested and used until a workaround is developed. In this way, upgrading legacy systems can occur independently while the organization reaps the benefits of adopting emerging technologies.
The point is, dependency on legacy systems could be more of a psychological issue than a practical issue. The consequences of inaction could be playing catch-up for years with competitors who have overcome this challenge. Therefore, the sooner this is overcome, the sooner an organization can explore and adopt emerging technologies to stay current and relevant in today’s marketplace.
Putting into place supporting business practices
Once an emerging technology is identified as a good fit for an organization, another risk lies in its implementation. No matter how brilliant the technology is, the implementation will fail unless supporting business practices are put into place, notably Organizational Change Management (OCM).
Implementing emerging technology can seem like a disruptive threat to many organizations. Hence, change management concepts must be implemented early on. The human element of technological adoption is the most critical factor in a successful implementation, especially competency alignment and cultural fit. The business transformation journey is filled with rewards, including building deep, and enduring customer relationships. However, it does have many moving parts, and OCM requires full-time attention from the Program Management Office (PMO).
All significant business transformation programs will use the organization’s PMO. The power of emerging technology is such that there are risks of misuse and even abuse.
Therefore, it is wise to strengthen the organization’s Ethics Management Office (EMO) and align this with regulatory governance functions. This will allow for better dialogue with policy-makers, external audits, and regulators. If not already in place, organizations should consider building a PMO and an EMO to assist with OCM and address potential ethical issues. Putting into place supporting business practices is a critical success factor for adopting emerging technologies.
One Bank had selected a promising decision engine and dynamic customer journey platform with high hopes to grow their portfolios at acceptable levels of risk. However, initial implementation efforts floundered and eventually failed. Why? The implementation director had competency gaps in transformational leadership and organizational agility. The implementation team members were unable to encourage the innovative culture that needed to support the business transformation. When competency alignment and cultural fit issues were addressed, the Bank encountered a successful implementation, resulting in better customer experience and solid portfolio growth.
Mitigating cybersecurity threats
A recent poll at the Global Risk Institute in Financial Services asked executives for the most challenging issues in the following 12 to 24 months.
The first challenge was the adoption of emerging technologies, and the second was cybersecurity threats. Cybersecurity threats include:
- Distributed Denial-of-Service (DDoS) attacks, where the aim is to flood the target’s bandwidth, making it unavailable or too slow for legitimate customers.
- Person-in-the-Middle (PITM) attacks, where the attacker intercepts the communications between two parties to make each believe that they are directly communicating.
- Advanced Persistent Threats (APT), which play a long-term game of stealth to remain undetected after breaching a network.
Cybersecurity incidents continue to make headlines. Many organizations cope with a daily barrage of malicious activity, so much so that cybersecurity insurance is re-evaluated regularly, and damage control drills are practiced. The world’s most valuable resource is no longer oil, but data. However, data is useless unless vulnerabilities in emerging technology are addressed to avoid compromising critical infrastructure. The selected technology needs to have complete visibility of technical infrastructure and oversight of alerts. Many cybersecurity solutions have corresponding mobile applications that allow for continuous monitoring of an organization’s technical infrastructure, any malicious activity, and security breaches.
It is crucial to monitor both incoming and outgoing data traffic, renew security certificates, and regularly install software updates and patches. Successful adoptions of emerging technology include an enterprise-level assessment of cybersecurity solutions and follow-up to address any gaps.
How well will you manage your risks in adopting emerging technologies?
Emerging technologies allow organizations to “see” online customers and significantly enhance customer experience and retention through dynamic mass customization. All people, processes, and systems of an organization can be fully integrated within a holistic ecosystem, thus reducing risk and allowing profitable scaling.
Adopting emerging technologies is not for the faint of heart. If you want to truly differentiate yourself from your competitors, there are tremendous rewards in appropriately managing your risks.