Digital Transformation: New Dimensions of Risk and Risk Mitigation

Digital Transformation: New Dimensions of Risk and Risk Mitigation

As value propositions for organizations have changed, risks and risk mitigation strategies have changed along with them. When value was derived chiefly from physical property, risk involved more traditional theft or destruction of property and the technologies of fences and vaults, and fire extinguishers and insurance were developed to mitigate such risk to physical property. When value propositions migrated increasingly to services, risk of loss of proprietary secrets emerged, and mechanisms of secrets and confidential information were deployed to mitigate the risk of loss of such intangibles. The digitization of information led to new intangibles markets and new risk mitigation (in the form of information flow controls such as DRM and encryption).

Now, as value is increasingly embedded in social networks and other sociotechnical systems, it can be said that value is now in the relationship network “edges” themselves, rather than the network entity “nodes.” This shift is forcing consideration of risk mitigation strategies for new forms of “interaction risk.” These strategies look to such things as mechanisms of incentives, penalties, and normative and behavioral standards to help render the human elements of these valuable relationships more reliable and predictable, reducing risk./p>