Downloaded 27 times
Uploaded byWei Chieh Lim
Managing Digitalisation Risks with Lean and Agile Thinking
The document discusses managing digitalization risks in a volatile, uncertain, complex, and ambiguous (VUCA) environment, emphasizing the need for agile and lean thinking. It criticizes traditional risk management approaches for inadequately handling the complexities of digitalization and promotes a more dynamic strategy focused on value creation and adaptability. Key recommendations include fostering collaboration, taking iterative approaches, and evolving risk assessment methods to better respond to the challenges posed by digital transformation.
![[Accenture] Digital Business 2017](https://cdn.slidesharecdn.com/ss_thumbnails/digitalbusiness-140324050918-phpapp02-171229091300-thumbnail.jpg?width=640&height=640&fit=bounds)
Managing Digitalisation Risks with Lean and Agile Thinking
- 1.
- 2. measurity commercial inconfidence | We operate in a VUCA environment 2 V U C A olatility ncertainty omplexity mbiguity Unexpected and unstable challenges Unclear cause and effect Numerous Interrelated variables Unprecedented challenges and âunknown unknownsâ Create unpredictable demands on resources Challenge decision making abilities Overload current processing capabilities Unsure about course of action to be pursued
- 3. measurity commercial inconfidence | Digitalization is VUCA 3 1% of world population 40% of world population Third billion First billion Second billion Source: http://www.internetlivestats.com/internet-users/ 4.4 zettabytes of data in the digital world 1 billion websites in 13 years Changed the way we create and communicate Transformed organisation design and business models
- 4. measurity commercial inconfidence | Technological Revolutions ď GDP Growth 4 F S D First Industrial Age (1760 â 1840) Second Industrial Age (1860 â 1914) Digital Age (1950 â today) Convergence Social Mobile Big Data Cloud Digitalisation Megatrend
- 5. measurity commercial inconfidence | Digitalisation occurs at three waves and levels Digitising Information1 Digitising process activities2 Digitising business models3 Converting analogue information into digital resources Automating or reengineering processes for efficiency and to manage greater complexity. Driving the participation age and shifting the paradigms of customer engagement models. ď Convergence of technologies Most obvious and immediate use Other industries and applications Change the way we operate Three Waves of Technological Revolutions ďĄ Connected people and things ďĄ Network bandwidth ď˘ Cost of data storage
- 6. measurity commercial inconfidence | Digitalization challenges require new risk thinking 6 V U C A olatility ncertainty omplexity mbiguity Looking beyond the instability to have a clear intent and direction for the desired future state Having insights into factors to be considered, discovering new ways of thinking and acting Focusing on what is required to deliver increasing value through digitalisation Being ready and responsive by taking a nimble, flexible and lightweight approach V U C A ision nderstanding larity gility
- 7. measurity commercial inconfidence | VUCA demands preparedness and anticipation Strategies Programmes Projects and Operations Materialise intent and contain risks as they appear Strategic decisions to achieve goals Tactical decisions to determine plans Operational decisions to implement actions Adjust plans in agile manner to mitigate potential impact Eliminate preventable risks
- 8. measurity commercial inconfidence | Traditional risk approach applied on digitalisation Consider traditional approach for managing technology risks when applied to a digitalisation project at the tactical level. Identify all âknownâ technology risks with adverse impact on the project Prepare risk statements detailing the loss potential Debate probability and impact to determine the risk exposure Consider preventive and detective measures to mitigate the exposure Aggregate risk profile with analysis of other digitalisation projects to form bottom-up larger risk picture for the overarching digitalisation programme 8 1 2 3 4 5
- 9. measurity commercial inconfidence | Possible issues with traditional approach 9 Produces risk profile and mitigation plan that is ineffective against the actual risks Complexity from possible use cases and interplay of risks between different technologies and platforms Interplay of Risks Point-in-time assessment does not take into account the time horizon Linear Approach Unable to comprehensively identify all risk events upfront and accurately pinpoint the likelihood of each risk due to limited digital knowledge Limited Information Influenced by individual prejudices and past experience which may not be a reliable indicator of the digital future. Subjectivity of Assessment Barrier in the increasingly competitive and VUCA environment when focus is not value creation Loss Prevention Focus
- 10. measurity commercial inconfidence | Need for more agile and lean approach 10 V U C A Digitalisation Megatrend Interplay of Risks Linear Approach Limited Information Subjectivity of AssessmentLoss Prevention Focus Risk Management Problem + + Lean thinking brings clarity of vision for understanding and insights into managing digital risks Requires more forward looking approach to address unprecedented future risks Create new risks, alter risk profiles and disrupt existing business models Demands more active and responsive approach in engaging with VUCA Agile thinking brings continuous improvement, and ability to be adaptive and responsive to change =
- 11. measurity commercial inconfidence | Applying lean and agile risk thinking 11 Focus on value as the highest priority1 Foster a highly collaborative environment2 Take an iterative and incremental approach3 Eliminate waste in resources4 Create flow and pull in value stream5
- 12. Our senior practitionersbuild organisational capabilities across Asian economies. Bringing deep domain expertise and decades of leadership experience to every engagement, we deliver measurable, purposeful, and sustainable outcomes. This is measurity. Š ASEANTLC PTE. LTD. (Registration No.: 201406978D) 2014. All rights reserved. No part of this publication shall be reproduced or transmitted in any form or by any means, without express consent.
Editor's Notes
- #3Â Organisations today are operating in a relentlessly changing and uncontrollable macro environment. The political, economic, social, technological, legal and environmental challenges have increased the complexity of operating characteristics and velocity that organisations have to adapt just to keep up. In recent times, various leaders and scholars have described this environment using the military term VUCA, which was first used in the 1990s to characterise the extreme post-war environment in Afghanistan and Iraq. VUCA refers to Volatile, Uncertain, Complex and Ambiguous, characterising a dynamic, unpredictable and chaotic environment. [slide] In the past, leaders can solve problems, make decisions and plan for the future on the basis of analysing an issue and deliberating the path forward according to tried and tested methods. Organisational changes are measured and controlled based on current and projected capabilities. In a VUCA environment, rapid and uncontrollable changes in the external environment are demanding leaders to be more aware and ready, and organisations to be prepared and resolved
- #4Â Digitalization is VUCA. The digital age megatrend remains one of the most challenging future that organisations are grappling with. [slide] The disruptive nature of the digital revolution is transforming business models and introducing increasing uncertainty into both internal and external environments. BUT, most organisations are still approaching the risk challenge using the same methods they have been using.
- #5Â The first industrial age was fuelled by coal and steam, bringing us the steam train, steam ships and our factory systems. The second industrial age was powered by petroleum and electricity, driving mass production and ushering in cars, planes and telephones. The digital age began with transistors which was soon replaced by integrated circuits, rapidly driving a knowledge-based society and a high-tech global economy. Studies have shown that 10% increase of broadband penetration increases the GDP by 1.3%. The digital megatrend of converging technologies â social, mobile, cloud and big data, is propelling the next growth curve of the global economy.
- #6Â The first wave starts with new inventions that are put to the most obvious and immediate use, where not all the implications of the new technology is fully understood. A second wave typically follows quickly as technologies find its way into other industries and for other applications. The most significant change comes in the third wave when technologies change the way we operate. In the industrial age, we saw how the factory systems dramatically changed the way human effort is organised, managed, measured and rewarded to achieve greater results. The third wave of the digital age is upon us and allows us to live and work like we have never done before. This is happening at a rapid pace for matured economies and developing nations are similarly attempting to ride all the waves at once to accelerate their growth and catch up with the rest of the world.
- #7Â Digitalization challenges the current way organisations think about their strategy, leadership, operating models and organisational structure for decision making and execution. It presents numerous opportunities but is not without risks. Balancing and navigating through the oftentimes unchartered digital risk landscape is itself another major challenge for organisations pursuing their digital strategy in a VUCA world. To address the VUCA challenge, organisations must [slide] Viewed in this manner, organisations have an opportunity to respond rather than react by transforming their approach to digitalisation.
- #8Â Dealing with a VUCA world thus require organisations to acquire new capabilities in strategic planning, problem solving and decision making, demanding that organisations drive change through a process of preparedness, anticipation, evolution and intervention. [slide] Effective risk management will be critical for the organisation to be more prepared for and to anticipate challenges. The key question then is whether our approach to risk management remains relevant in todayâs VUCA environment with unrelenting risks.
- #12Â We propose that organisations address these issues through lean and agile risk thinking. Focus on value as the highest priority â Emphasise the value delivered by the risk management process, which is to maximise the value of digitalisation with necessary safeguards that do not impact strategic digital goals, taking guidance from the organisationâs risk culture. Foster a highly collaborative environment â Organise a small and lean team of knowledgeable and highly motivated individuals working together with business, technology and operational functions throughout the duration of the digitalisation programme. The team will serve as facilitators, advisors and partners. Take an iterative and incremental approach â Focus on early and continuous delivery of the risk management process. Risks are continuously assessed as we accumulate more information, and with every iteration and change throughout the programme. Changing requirements are welcomed as all stakeholders has recognised that risk understanding will only increase with cumulative knowledge and the criticality for risk mitigation to address actual risks. Eliminate waste in resources â Build a digital risk database with risk statements documented at the appropriate granularity and language to rapidly derive control measures. We see benefits in an industry level collaboration to build a consensus digital risk and control database to further reduce wasted resources in the ecosystem. This also reduces subjectivity in the assessment process. We then reduce the number of risk statements by adopting a use case approach to prioritize risk areas, consider interplay of risks and reduce analysis time. With each iteration, new use cases and associated risk areas may be identified and updated into the database. Create flow and pull in value stream â Increase flow in the risk assessment process by tightly integrating the risk identification, analysis and evaluation steps. Each risk that is identified will be immediately analysed and evaluated to determine the control measures, using the digital risk database to support this activity. The digitalisation programme must govern and commit stakeholders to treat the risk, monitor effectiveness and make adjustments in a short timeframe and as a continuous process. This increases timeliness and relevance in risk mitigation.