Organizations across all industries are becoming more reliant on digital technology to get the job done. In this era of digital transformation, technologies such as the internet of things (IoT), social media, machine learning (ML) big data analytics, artificial intelligence (AI) and augmented reality exist to help organizations realize their strategic business objectives.
Ultimately, these new technologies are intended to maximize speed, agility, efficiency, and profitability for the organizations that utilize them. Whether you want to streamline your operations, adopt new business models, or improve your customer experience — these are often the driving forces behind an organization’s decision to adopt new digital initiatives.
Clearly, the benefits of digital transformation are starting to catch on for many business leaders — in fact, 89 percent of organizations have already or have plans to adopt a digital-first strategy, and 74 percent of executive decision makers see digital transformation as a priority for their company.
Although digital transformation and the adoption of new technologies creates a variety of illustrious new business opportunities, it also inherently introduces new forms of risk.
Called digital risk, these unwanted and unexpected outcomes are a result of digital transformation, and they’re something that every organization will eventually need to learn how to manage if they want to survive.
Digital risks include cybersecurity risk, third-party risk, data privacy risk, and others, which we will examine more closely in the next section. One of the most common types of disruptions that stems from digital risks is that of a data breach — a security incident that can occur via a variety of exploitable vulnerabilities.
As more and more organizations start to embrace the age of digital transformation, it’s critical that your organization’s information security team can effectively keep your business secure while still enabling growth and innovation. However, as you scale, your attack surface will only continue to expand, which in turn, increases your exposure to outside threats.
By implementing digital risk protection and a digital risk management program that’s unique to your organization and its vulnerabilities, you’ll be better prepared to identify and mitigate digital risks before they do any real harm to your organization.
In this article, we’ll introduce ten common types of digital risks and provide you with a detailed description of each so that you can better understand them and position your business to manage digital risks more effectively and efficiently.
10 Types of Digital Risks You Should Know
As you begin to learn about the most common types of digital risks, you’ll probably start to notice that many of them have overlapping consequences. For this reason, putting a solution in place to address one of them may ultimately help you address others as well.
Cybersecurity risk refers to the risk of a cyberattack — an attempt by a malicious actor (or actors) to damage or destroy a computer network or systems. In the context of a growing attack surface in an increasingly sophisticated threat environment, cybersecurity risk is probably one of the most important — and growing — types of digital risk today.
Cyberattacks are often executed with the intention of accessing sensitive information and then using that information maliciously, whether it’s for extortion, identity theft, or simply to interrupt business continuity. The most common types of cybersecurity threats include malware and ransomware, social engineering attacks including phishing, man-in-the-middle (MITM) attacks, distributed denial of service (DDoS) attacks, structured query language (SQL) injection, and domain name system (DNS) attacks.
As organizations’ reliance on technology to support a remote workforce continues to grow, it’s likely that the number and severity of cyberattacks are bound to increase as well. When digital assets are moved away from an organization’s internal networks and employees connect externally to the digital environment, it usually results in a rapid increase of unauthorized access to sensitive information.
With the proliferation of the hybrid work environment following the COVID-19 pandemic, we saw how cyber criminals can take full advantage of the new vulnerabilities introduced to organizations and their workforce originating from an increased reliance on digital technologies.
A cybersecurity incident like a data breach can be not only a huge financial burden that many organizations simply can’t recover from — it can also be a huge blow to your organization’s reputation. Additionally, there can be legal ramifications that often result in fines or even jail time.
To avoid cybersecurity risks: you should start by identifying and analyzing your key assets such as customers and employees, technology, and software along with what cybersecurity vulnerabilities and exposures those key assets create. Use this information to help you create a cyber risk management plan for your organization’s data including regular staff cybersecurity training.
You should also regularly ensure that your cybersecurity protocols are up to date and adhere to data privacy regulations, implementing continuous monitoring to make sure that all your bases are covered. This is where tools can help — start with antivirus software and firewalls, and slowly build up your portfolio of security applications to avoid any redundancies or outdated approaches.
Although companies rely heavily on technology to carry out their business processes, the human element of risk will always be an important factor for consideration. Your employees inherently put your organization at risk in a variety of ways, whether intentionally or unintentionally.
The dynamic nature of today’s workforce and the gig economy also means that your organization might face a number of problems when it comes to talent acquisition. Finding employees who are well-versed in emerging technologies is difficult enough as it is, but retaining those employees who are experts in their field can be even more challenging.
In addition to skill shortages and high employee turnover, today’s flexible workforce and hybrid working environments mean that employees are likely to make more demands when it comes to their quality of work life. Keeping your employees happy will not only reduce the likelihood that they will leave, but it will also reduce the chance that they will act maliciously against your company.
Insider threats are often overlooked by organizations, simply because they want to trust their employees. However, employees that have access to your most sensitive information should be monitored closely to reduce the risk they pose to your organization.
To avoid workforce risks: provide regular training for your employees, covering topics such as cybersecurity, social engineering, internal controls, and an overview of all the digital risks posed to your business. The better informed your employees are, the less likely they are to make a mistake. You should also implement the principle of least privilege wherever possible, ensuring that your employees only have access to the information they need to do their job.
Identity and access management practices such as multi-factor authentication and strict password policies will help ensure that your organization is protected both internally and externally. If you aren’t already, try to prioritize your employees’ job satisfaction wherever possible to avoid risks such as high employee turnover.
As more and more organizations move to the cloud, this introduces a number of new risks including changes in architecture, implementation, deployment, and/or management of new digital business operations or information technology (IT) systems.
If your organization has already migrated to cloud computing technology, you’re probably already familiar with some of the risks associated with public cloud providers in particular. Cloud outages in particular are an important factor to consider when deciding whether or not to adopt cloud technologies. For this reason, many organizations have moved to a multi-cloud or hybrid cloud approach, which can introduce a number of risks as well.
To avoid cloud risks: make sure you are well versed in cloud service platform providers, and that you’re familiar with everything they do — and don’t — provide. Whether you choose to operate in the public cloud, private cloud, a combination of the two (hybrid cloud), or using multiple cloud solutions (multi-cloud), you need to know the details concerning their strategy, service level agreements (SLA), and pricing model. You should know exactly what to expect before you enter into an agreement with any cloud provider.
These are risks related to compliance requirements that are driven by new technology and the scope of data being created by your organization. With any new technology, there are often new requirements or rules that need to be implemented as well, or you risk non compliance with regulatory requirements for business operations, data retention, and other business practices.
As new technologies continue to emerge, compliance requirements change as well. For this reason, you need to make sure that your organization is up to date with its compliance in real-time, or you risk legal fines — or even jail time.
However, compliance risk doesn’t begin and end at your perimeter. Your third-party relationships also inherently put you at risk of non compliance, and it’s your responsibility to make sure that any vendor or service provider you do business with along the supply chain meets compliance requirements as well.
To avoid compliance risks: start by making a list of all the regulatory requirements and industry standards you — and your third parties — must meet. Consider using a governance, risk management, and compliance (GRC) software solution to help you implement, monitor, and measure the effectiveness of your internal controls and any gaps in your compliance.
Third Party Risk
Today, organizations in virtually every industry work with some type of third party, whether it’s a supplier, vendor, contractor, or service provider. No matter the nature of your relationship, your organization likely relies on third parties to perform a number of business functions that are critical to your business operations.
However, outsourcing to any third party inevitably creates risk. Whether it’s legal, compliance, financial, strategic, or reputational — trusting third parties to follow through with their end of a business agreement opens up your organization to a number of potential disruptions.
For instance, any vulnerabilities related to your intellectual property, data, operations, finances, customer information, or other sensitive information are all considered third party risks when those third parties have access to your networks and systems.
To avoid third party risks: implement a third party risk management plan as part of your overall risk management program. This should include a vendor risk management policy and a detailed description of the procedures and policies for each of the steps in the third party risk management process. Regularly send out questionnaires and surveys to your third parties to ensure that they are implementing the appropriate cybersecurity measures and that they are in compliance with regulatory requirements.
You should regularly review your third-party relationships and implement continuous monitoring to ensure that you are instantly made aware of any shortcomings. In some cases, you may even need to conduct an in-person audit of your third parties, depending on the answers they provide to your questionnaires.
With any new technology, there’s often a learning curve. As your organization becomes more accustomed to the new technologies it relies on, you’re likely to notice a number of new risks that maybe weren’t as apparent as before.
For example, the potential unavailability of critical systems due to power failures, dependencies, and incompatibilities can directly impact your business processes and employees, sometimes even halting operations altogether.
To avoid technology risks: make sure your disaster recovery plan and business continuity plan accounts for any technologies that you simply can’t live without, and stipulates an alternative solution should one of those technologies fail. You should also regularly backup your data in multiple on-site and off-site locations to ensure that you can still access your most critical information in the face of a disruption. Make sure all your employees are trained on any new technologies you introduce, including educating them about the potential risks they might pose.
Although it’s touted as the future of risk management, automation itself can have a sometimes negative impact on business processes. Optimizing and automating processes can ultimately save you time and money, allowing for easier scalability — but automation also has some downsides.
For instance, some automation solutions can unknowingly introduce software incompatibilities or add a level of redundant operational complexity. At the same time, more software means more vulnerabilities, which can escalate the likelihood of a data breach. If you adopt a new software, it’s up to you to make sure that it’s up-to-date and that any vulnerabilities are patched via software updates.
AI-based automation tools can also create risks that are often difficult to predict long-term, due to the constantly changing nature of the technology itself. Implementing this type of automation can often result in operational setbacks, increased complexity, and amplified vulnerability to cyber threats.
To avoid automation risks: your IT department should investigate any potential risks posed by automation software and configure tools to address them. Make sure any new software you install is addressing vulnerabilities via patching and updates, and regularly check online databases for any commonly exploited vulnerabilities (CVEs) to determine whether they could potentially affect your business. Ultimately, the automation software you use should make your job easier, not more difficult. If a solution isn’t working for you, it may be time to move on.
Resiliency risk refers to the risk of a negative event following the adoption of a new technology and the difficulty of minimizing the damage caused. This type of risk has to do with the availability of your business operations, and is mostly concerned with business continuity.
As stated before, the introduction of any new technology inherently poses risks to your business’s ability to operate effectively and efficiently. For instance, if your cloud service provider experiences an outage and you’re unable to access data in the cloud, it’s likely that many of your employees will be unable to perform their basic business functions. Or, perhaps a cyberattack on your operational technology systems leads to a complete halt of your business altogether — what will you do then?
Ultimately, how resilient your business is will depend on how flexible you are. Relying too heavily on a single technology to perform critical tasks is likely to lead to a disruption in your business continuity and will test the resilience of your organization.
To avoid resiliency risks: create a comprehensive business continuity plan that includes a disaster recovery plan. Make sure that you have alternative solutions for any technologies that you rely heavily on to perform your basic business functions, and make sure your employees are well-versed in the processes and procedures that will come after any type of disruption to your business.
Data Privacy Risk
This type of risk has to do with your organization’s ability to protect personal information including full names, email addresses, passwords, physical addresses, and even dates of birth. This type of data can easily be misused by cybercriminals as a way of harming or misusing your employees’ — or your customers’ — identity.
Data breaches have been at the forefront of cybersecurity and they’re usually the aim of a cyberattack. Especially where health care organizations are concerned, keeping your employees’, customers’, and clients’ data safe is of the utmost importance. Not only do you owe it to the people who are relying on your organization to keep their data secure, but a security incident resulting in a data breach often has far reaching consequences for the organizations who fall victim to a breach, including reputational, financial, legal, and regulatory harm.
To avoid data privacy risks: implement strict cybersecurity measures, including identity and access management, multi-factor authentication, and password policies. You should also regularly train your employees to spot and avoid social engineering attempts that could result in an internal breach. Again, you’ll need to take your third-parties into account when it comes to preventing data privacy risks, as many of these third parties probably have access to your and your customers’ sensitive data. If you do experience a breach, you should alert anyone that’s been compromised before the attackers do — this might help you save face in the long-run with any of your customers who might have had their personally identifiable information (PII) stolen.
Social Engineering Risk
Although social engineering attempts are technically a cybersecurity threat, the rapid introduction of new technologies — and especially social media — means that social engineering has grown into an unmanageable risk that is deserving of its own category.
Social engineering attempts range from phishing attacks via email, misuse of social media, smishing, vishing, whaling, and more. The most common type of social engineering attack is probably phishing — an attempt to trick users into bypassing normal cybersecurity practices and giving up sensitive data such as usernames and passwords, bank account information, social security numbers, and credit card data.
To avoid social engineering risk: implement cybersecurity awareness training for every one of your employees across your organization, emphasizing the importance of phishing reporting. You should also consider running random phishing simulations and regularly test employees’ ability to spot phishing attempts, rewarding those who are successful and providing additional training for any employees who are having difficulty. You should also push HTTPS on your website to create secure, encrypted connections, institute access management policies and procedures, use reliable email and spam filters, require multi-factor authentication, or even use email encryption and email signing certificates.
Mitigate Digital Risks with Reciprocity ZenRisk
Managing digital risks takes time, and it’s difficult. As such, information security teams first have to understand what digital risk is as well as the types of digital risk that exist today so they can implement the most effective digital risk management strategies. Fortunately, there are solutions that can help.
Reciprocity® ZenRisk is an integrated cybersecurity risk management solution designed to provide you with actionable insights to gain the visibility you need to stay ahead of threats and clearly communicate the impact of risk on high-priority business initiatives. Turn the unknown into quantifiable and actionable risk insights with built-in expertise that identifies and maps risks, threats and controls for you, so you can spend less time setting up the application and more time using it.
A single, real-time view of risk and business context allows you to clearly communicate to the board and key stakeholders in a way that’s framed around their priorities, keeping your risk posture in sync with the direction your business is moving.
Reciprocity ZenRisk will even notify you automatically of any changes or required actions, so you can be on top of your risk posture like never before. Eliminate time-consuming, manual work and streamline collaboration by automating workflows and integrating with your most critical systems.
Plus, Reciprocity ZenRisk is seamlessly integrated with Reciprocity ZenComply so you can leverage your compliance activities to improve your risk posture with the use of AI. Built on the Reciprocity ROAR Platform, the Reciprocity product suite gives you the ability to see, understand and take action on your IT and cyber risks.
Now, through a more proactive approach, you can give time back to your team with Reciprocity ZenRisk. Talk to an expert today to learn more about how the Reciprocity Product Suite can help your organization mitigate cybersecurity risk and stay ahead of threats.