10 Common Types of Digital Risks

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 (AR) exist to help organizations realize their strategic business objectives.

Ultimately, these new technologies 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.

The benefits of digital transformation are starting to catch on for many business leaders. 89 percent of organizations already 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 adopting new technologies create various illustrious business opportunities, they also inherently introduce new risk forms.

In this article, we’ll introduce ten common types of digital risks and provide a detailed description of each so that you can better understand them and position your business to manage digital risks more effectively and efficiently.

What are Digital Risks?

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 risks, third-party risks, and data privacy risks, 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. This security incident 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 enabling growth and innovation. However, your attack surface will only expand as you scale, increasing your exposure to outside threats.

By implementing digital risk protection and a digital risk management program unique to your organization and its vulnerabilities, you’ll be better prepared to identify and mitigate digital risks before they harm your organization.

What are Common Digital Transformation Challenges

When an organization undergoes significant changes, it will likely face various problems and obstacles. This also applies to digital change, and businesses may suffer complications if the shift is not seamless.

The following are the most typical digital transformation challenges:

Inadequate Organizational Change Management Approach

A structured strategy for managing changes in a company, in this example, driving digital transformation, is called Organizational Change Management. It might be challenging, but it is critical.

One of the fundamental causes for the high failure rate is a lack of adequate organizational change management, which can have a detrimental influence on an organization’s digital transformation.

Additionally, organizational change management addresses various organizational components rather than just one.

For example, it begins at the top and encompasses changes in culture, attitude, procedures, structures, and the overall business model.

A solid and effective change management plan is critical for success since it boosts an organization’s chances of achieving its transformation goals.

Inadequate Knowledge

When a business strives for digital transformation, proficiency is necessary to ensure its progress. Given the complexity of digital transformation methods, the appropriate skill and knowledge set are needed to accomplish the essential changes.

According to KPMG, Organizations have highlighted skill shortages as a challenge to digital transformation.

44% of poll respondents stated a lack of specialists hampered growth, 32% said adding new people and new systems is expensive, and 29% said a lack of ability to apply these systems slowed progress.

Employees with suitable capabilities in digital transformation methods, cybersecurity, application architecture, and other related IT and non-IT sectors need more supply in organizations.

Constant Evolution of Customer Requirements

Customers’ expectations and needs have risen due to new advancements in customer service, posing a challenge for many businesses.

Even when businesses invest years of work in digital transformation, customers’ expectations will likely change over time as they seek more user-friendly and modernized offerings.

This means that more work is required to install new digital technologies that will suit the ever-changing demands of customers.   

Internal Opposition to Change

Despite their extraordinary capacity to adapt to change, people prefer comfort and regularity since it gives them a sense of security.

Changes, huge ones, can make individuals feel uneasy and generate stress for some, negatively influencing their well-being. As a result, when companies undergo digital transformation, they may encounter employee resistance.

The best approach is to keep employees involved throughout the process and to be open and honest with them.

Furthermore, leaders must be aware that even if they do everything correctly, the rapid changes and new tools, procedures, and technologies can influence their performance and efficiency if the transition is short.

That is why beginning with a gradual transition is critical, as it allows individuals to adapt their mentality and prepare for new developments. 

Security Concerns

Organizations are becoming more vulnerable to risk by implementing remote labor, digital processes, and cloud-based technologies. As a result, to defend themselves against attacks, businesses must develop more robust security measures and increase their cybersecurity.

Budget Constraints

Another issue with digital transformation is the hefty expenses associated with it. Because this is a significant cost, companies must carefully plan the budget and develop a strategy that addresses and responds to the demands of both consumers and organizations.

10 Types of Digital Risks You Should Know

As you learn about the most common types of digital risks, you’ll probably notice that many have overlapping consequences. For this reason, putting a solution in place to address one of them may also help you manage others.

Cybersecurity Risk

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 to access sensitive information and then use it maliciously, whether 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, the number and severity of cyberattacks will likely increase.

When digital assets are moved away from an organization’s internal networks and employees connect externally to the digital environment, the risk of unauthorized access to sensitive information rapidly increases.

With the proliferation of the hybrid work environment following the COVID-19 pandemic, we saw how cybercriminals can take full advantage of the new vulnerabilities introduced to organizations and their workforce from increased reliance on digital technologies.

A cybersecurity incident like a data breach can be not only a substantial financial burden that many organizations simply can’t recover from — it can also be a massive blow to your organization’s reputation. Additionally, legal ramifications can often result in fines or even jail time.

To avoid cybersecurity risks: you should start by identifying and analyzing your critical assets, such as customers and employees, technology, and software, along with what cybersecurity vulnerabilities and exposures those critical 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 ensure 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 redundancies or outdated approaches.

Workforce Risk

Although companies rely heavily on technology to carry out their business processes, the human element of risk will always be an essential factor for consideration. Your employees inherently put your organization at risk in various ways, intentionally or unintentionally.

The dynamic nature of today’s workforce and the gig economy also means that your organization might face some problems regarding talent acquisition.

Finding well-versed employees in emerging technologies is difficult enough, but retaining those 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 regarding their quality of work life.

Keeping your employees happy will reduce the likelihood that they will leave and the chance that they will act maliciously against your company.

Organizations often overlook insider threats because they want to trust their employees. However, employees with 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 protect your organization internally and externally.

If you aren’t already, prioritize your employees’ job satisfaction wherever possible to avoid risks such as high employee turnover.

Cloud Risk

As more and more organizations move to the cloud, this introduces several new risks, including changes in architecture, implementation, deployment, 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.

Cloud outages, in particular, are an essential 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 also introduce several risks.

To avoid cloud risks: ensure you are well-versed in cloud service platform providers and are familiar with everything they provide and don’t.

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.

Before agreeing with any cloud provider, you should know exactly what to expect.

Compliance Risk

These are risks related to compliance requirements driven by new technology and the scope of data your organization creates.

With any new technology, new requirements or rules often need to be implemented, or you risk noncompliance 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 must ensure 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 management doesn’t begin and end at your perimeter. Your third-party relationships also inherently put you at risk of noncompliance, and it’s your responsibility to ensure that any vendor or service provider you do business with along the supply chain also meets compliance requirements.

To avoid compliance risks: start by listing 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 a third party, whether a supplier, vendor, contractor, or service provider.

No matter the nature of your relationship, your organization likely relies on third parties to perform several 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 several 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 step in the third-party risk management process.

Regularly send out questionnaires and surveys to your third parties to ensure they implement the appropriate cybersecurity measures and comply with regulatory requirements.

You should regularly review your third-party relationships and implement continuous monitoring to ensure you are instantly aware of any shortcomings.

Sometimes, you may even need to conduct an in-person audit of your third parties, depending on their answers to your questionnaires.

Technology Risk

With any new technology, there’s often a learning curve. As your organization becomes more accustomed to the latest technologies it relies on, you’re likely to notice several 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 account for any technologies you simply can’t live without and stipulate an alternative solution should one of those technologies fail. You should also regularly back up your data in multiple on-site and off-site locations to ensure you can still access your most critical information in the face of disruption.

Make sure all your employees are trained on any new technologies you introduce, including educating them about the potential risks they might pose.

Automation Risk

Although it’s touted as the future of risk management, automation can sometimes negatively impact business processes. Optimizing and automating processes can save you time and money, allowing for more effortless scalability — but automation also has some downsides.

For instance, some automation solutions can unknowingly introduce software incompatibilities or add redundant operational complexity.

At the same time, more software means more vulnerabilities, which can escalate the likelihood of a data breach. If you adopt new software, it’s up to you to ensure 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 addresses vulnerabilities via patching and updates, and regularly check online databases for Commonly Exploited Vulnerabilities (CVEs) to determine whether they could affect your business.

Ultimately, the automation software you use should make your job easier, not more difficult. It may be time to move on if a solution isn’t working for you.

Resiliency Risk

Resiliency risk refers to the risk of an adverse event following adopting 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 mainly concerned with business continuity.

As stated before, introducing any new technology inherently risks your business’s ability to operate effectively and efficiently.

For instance, if your cloud service provider experiences an outage and you cannot access data in the cloud, many of your employees will likely be unable to perform their primary business functions. Or, perhaps a cyberattack on your operational technology systems will completely halt 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 will likely lead to a disruption in your business continuity and will test your organization’s resilience.

To avoid resiliency risks: create a comprehensive business continuity plan with a disaster recovery plan.

Make sure you have alternative solutions for any technologies you rely heavily on to perform your primary business functions, and ensure your employees are well-versed in the processes and procedures that will come after any disruption.

Data Privacy Risk

This type of risk involves your organization’s ability to protect personal information, including full names, email addresses, passwords, physical addresses, and even dates of birth. Cybercriminals can easily misuse this type of data to harm or misuse your employees’ — or customers’ — identity.

Data breaches have been at the forefront of cybersecurity and are usually the aim of a cyberattack. Especially where healthcare organizations are concerned, keeping your employees’, customers’, and clients’ data safe is paramount.

Not only do you owe it to the people 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 that 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 consider your third parties when preventing data privacy risks, as many of these third parties probably have access to your and your customers’ sensitive data.

If you experience a breach, you should alert anyone who’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 — especially social media — means that social engineering has grown into an unmanageable risk 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 everyday 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 all 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 success and providing additional training for any employees with 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 ZenGRC

Managing digital risks takes time, and it’s complicated. As such, information security teams must first understand what digital risk is and the current types of digital risk to implement the most effective digital risk management strategies. Fortunately, some solutions can help.

ZenGRC is an integrated Governance, Risk Management, and Compliance solution designed to provide you with actionable insights to gain the visibility you need to stay ahead of threats and 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 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 communicate to the board and key stakeholders in a way framed around their priorities, keeping your risk posture in sync with the direction your business is moving.

ZenGRC will 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.

With ZenGRC, you can leverage your compliance activities to improve your risk posture using AI. Built on the ZenGRC Pro Platform, the ZenGRC solutions allows you 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 ZenGRC. Talk to an expert today about how ZenGRC solutions can help your organization mitigate cybersecurity risk and stay ahead of threats.