Page 61 - IRMSA Risk Report 2020

EXPERT OPINION

ALEX ROBERTS
REGIONAL DIREC TOR: SALES AND OPER ATIONS, CUR A SOFT WARE

Disruption is not a new concept, new technologies and techniques have replaced older
less effective means for decades, however the speed at which disruption is happening has
accelerated exponentially. Disruption should not be assessed on a continuum of “better”
or “worse” as a risk but as a dynamic element with potential positive or negative outcomes
depending on the context in which it is assessed.

Innovation and disruption are often confused as being synonymous. Innovation has the
potential to be disruptive, but it is not disruption. Innovation is simply a change that results
in a new value proposition. Disruption, however, is fundamental shift that takes place in the
system, environment or technology which results in the inability to return to the previous
version or state. Not all innovation is disruptive regardless of how revolutionary it may be, the practicalities and cost of doing something differently can
stifle the adoption of new innovations.
It is important that when debating concepts of disruption that everyone has a sound understating and ability to differentiate between change, innovation
and disruption as this will have a ripple effect on how the risk is defined, categorised assessed and mitigated or capitalised on as an opportunity.

Key impediments would consist of reactive and uninformed policy making from a governmental perspective. Often, we see policy come about after a
new technology has run unregulated for a while which results in an over-regulation of that technology or improper regulation hastily being implemented.
Another impediment would be a resistance or inability to adapt to change from an organisational perspective and failure to embrace new value-adding
technologies. A public education system that does not focus on upskilling our youth to compete in technology driven global economy.
Current market players will need to make drastic changes to their existing operating models in order to respond to the competition posed by new
disruptive market players. In 2019 we saw examples of this in the financial space with large banks closing branches and retrenching staff in order to
respond to the threat posed by smaller more competitive digital banks. A key indicator or trend seen is that of disruption originating from outside an
organisation’s traditional markets. Environmental scanning has to expand further than a typical or known competitor to assess where unconventional
competition could arise. Banking has had a clear competitive pathway but with the increasing demand for access to funds an opening was created for
social media channels to substitute conventional banking.

NICKY DOWNING
CHIEF EXECUTIVE OFFICER, GUIDELINE BIZTECH

There are a number of top businesses that are highly effectively managing one aspect of this risk within their own AI projects. However, the big
stumbling block remains old thinking and old risk methodologies, which are ill-equipped to truly even touch the sides of this risk in an efficient and
effective manner. The breadth and depth of this risk cannot be effectively managed without the risk approach incorporating smart tech into its risk
decision-making and internal audit (IA) processes.

The most impactful thing they can do right now is to engage in an extensive maturity evaluation with a team of advisors that knows and understands
the nature of this risk landscape. It is not possible to even start developing a strategy to address this type of risk when you “do not know what you do
not know.” From there, it would be wise to engage in an organisation-wide disruptive technology audit with a highly experienced and knowledgeable
team to effectively evaluate the “Context of the Organisation.” This will enable organisations to find an appropriate approach to start getting ahead.
The two recommended actions above will thus significantly help executives
and risk professionals to truly start understanding the “As Is” digital landscape of
the organisation, so that the “To Be” risk identification, evaluation and ongoing
monitoring approach can be efficiently determined. As disruptive tech is here and
growing, part of the approach must include upskilling risk and executive teams.
Executives must keep up with the pace of disruptive technology. Teams must
ensure that they truly take responsibility to understand the new world in which
businesses operate.
As AI and automation continue to be adopted into day-to-day business, it is the
responsibility of both the executive teams and the risk management teams to ensure
that the business’s core values, ethical principles, integrity, and social responsibilities
are part of the smart tech change management processes being adopted to drive
new business opportunities and growth. These are extended governance principles
that are the responsibility of executive teams – they should not be left solely to the
technologist and IT teams.

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