In the business scene, digitalization and DX are progressing. Although there are many benefits to digitalization and DX, there are also risks. What countermeasures can be taken to deal with possible risks?
In this column, we will explain specific examples of digital risks, their causes, and the digital risk management required of companies.
INDEX
- What are digital risks to consider when promoting DX?
- Causes of digital risk
- Impact of digital risks on businesses
- Digital risk management that companies should address
- summary
What are digital risks to consider when promoting DX?
The Ministry of Economy, Trade and Industry defines “DX” in the “DX Promotion Indices” as follows.
In response to rapid changes in the business environment, companies are leveraging data and digital technology to transform products, services, and business models based on the needs of customers and society, as well as to transform their operations, organizations, processes, and companies. To transform our culture and climate and establish competitive advantage.
As corporate activities are promoted with DX in mind, there is a need to understand and respond to digital risks. Digital risk is a business risk that arises from the use of the Internet and the digitalization of business operations. Opportunities to utilize IT tools, digital devices, and SNS in business situations have increased, and we can now obtain great benefits. However, at the same time, digitalization also carries the risk of problems that could develop into situations that could undermine trust in companies. Digital risk is a problem that can arise for any company. Therefore, all companies, regardless of company size or industry, need to understand and be careful about digital risks.
Causes of digital risk
We will explain the causes of digital risks.
Insufficient measures against cyber attacks
Cyber attacks are a problem on a global scale. In fact, companies and government agencies become targets of external cyberattacks, and events including damage often make the news. Cyber attacks have several purposes, but in recent years, crimes related to money have become more visible and recognized as a social issue. In connection with cyber-attacks, the attitude of neglecting security systems is similarly viewed as problematic. If the security system is not solid, there is a risk that the computer being used may be infected with a virus or that confidential information may be leaked externally.
Inappropriate use of social media
Social media is now recognized as an essential tool for corporate marketing activities. However, if used incorrectly, you may be exposed to various risks. A typical example is a flare-up. Risks that can lead to a firestorm can come from the company as a whole or from its employees. Examples of the risk of commotion by a company include criticism of the methods and content of public relations activities, criticism of deficiencies in products and services, and posting inappropriate apology letters for troubles that have occurred. Examples of the risk of fire caused by employees include whistleblowing of various types of harassment and posting inappropriate content such as actions that violate public order and morals or illegal activities.
Lack of IT literacy
The level of IT literacy of employees is also related to the occurrence of digital risks. If many employees do not know how to use digital tools, such as computers and software, or are unable to utilize them correctly, digital risks such as information leaks will increase.
Digital transformation with unclear objectives
The number of companies promoting DX is on the rise. However, some companies may be working on DX promotion without really understanding the meaning of DX. After all, DX is a means to increase a company’s advantage and improve operational efficiency. If employees promote DX without understanding what benefits it will have for their company or the necessary responses for DX, confusion will occur as they will not be able to fully utilize the digital technology that has been introduced. As a result, this could lead to a decline in employee performance and a lack of countermeasures against the aforementioned cyber attacks.
Impact of digital risks on businesses
Let’s take a look at the impact digital risks have on businesses.
Decline in social trust
Particular attention should be paid to the decline in social trust. For example, on corporate social media, posts can lead to unexpected flameouts. If you post problematic content on a company’s SNS, the posted content will quickly spread and become known to the public, reducing the company’s social credibility. Information leaks due to frayed security measures can similarly lead to a decline in social trust, so caution is required.
Claim for damages
When personal information owned by a company is leaked to an external party due to a cyber attack, the victim may be required to pay compensation for damages. Furthermore, if a cyber attack causes a system to go down and progresses to the point where a business partner’s business is disrupted, the business partner may also be required to make a claim for damages.
Lost business opportunity
Digital risks can also lead to lost business opportunities. For example, if an e-commerce site with 100 purchases per day is targeted by a cyberattack becomes unviewable, and takes a week to recover, a simple calculation would mean that the sales of 700 products would be lost. Masu. If the above-mentioned case occurs in your main business, it will result in immeasurable losses and you may lose important business opportunities for your company. In this way, various risks that arise due to insufficient digital risk management lead to the loss of business opportunities.
Digital risk management that companies should address
If we are to promote DX, it is necessary to take measures that anticipate digital risks. Here, we will explain the digital risk management required of companies.
Promotion of IT literacy education
IT literacy education for employees is essential when working on digital risk management. In order to raise the level of IT literacy among employees, it is important to conduct in-house IT literacy training. If employees have the opportunity to learn about the troubles that digital risks can cause and the damage they can cause to their companies, they will be more alert. Another example of risk management is establishing rules for the use of IT tools and digital devices. For example, when it comes to taking out computers used for work, employees may be required to report where they stop during the trip and when they take them home, or a system requiring permission from their superiors be introduced. For employees who are not accustomed to using computers and IT tools, follow-up will be provided as necessary. If your company does not have someone knowledgeable about digital risks and IT literacy education, consider using external experts to strengthen your education system.
Information security measures
In order to prevent confidential corporate information from leaking outside, it is important to review information security measures. In addition to installing security software, after installing it, be sure to check the warranty expiration date to ensure that security is being maintained properly, and to periodically check that the software has been updated to the latest version. If the warranty has expired or the device has not been updated to the latest version, the security environment cannot be maintained in a sufficient state, increasing the risk of information leakage or virus infection in the event of a cyber attack. As part of your information security measures, consider introducing a system that can manage security.
Creation of SNS guidelines
When companies and employees use SNS, it is important to create guidelines that set out guidelines and rules for use. Specifying what you can and cannot do on SNS and establishing what to do in the unlikely event that trouble occurs will help minimize the risks of using SNS and protect your company’s trust.
summary
Digital risks can cause damage to corporate activities, such as a decline in social trust, claims for damages, and loss of business opportunities. Digital risks can have a negative impact on corporate performance and put pressure on corporate management itself, as it can not only cause financial damage but also damage the company’s image. In order to reduce digital risks, it is necessary to develop security measures, provide IT literacy training for employees, and create and disseminate rules for using SNS. Why not take a look at your company’s digital risks and consider them in conjunction with risk management measures?
