How and to what extent are risk management systems being improved through the use of new ICT information technologies, internet and Industry 4.0?
Business analytics, financial analysis, organisational management systems, decision support systems, risk management systems, etc. have been improved in recent years through the implementation of new ICT, Internet and Industry 4.0 information technologies. However, to what extent does the application of new ICT, Internet and Industry 4.0 information technologies in the aforementioned systems of performed analysis, management, etc. generate efficiency gains in the operation of these processes? How and to what extent are risk management systems improved through the application of new ICT, Internet and Industry 4.0 information technologies? Which of the applied ICT, Internet and Industry 4.0 information technologies have contributed the most in terms of increasing the effectiveness of the implementation of risk management processes?
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Dariusz Prokopowicz
Hi Dariusz Prokopowicz . If I understand the question correctly, ICT has significantly improved risk management in a variety of ways, and continues to do so with ever increasing benefits.
To ensure we are discussing the same thing, by 'risk management' I mean the risk identification, risk measurement, risk mitigation, and risk reporting. Examples of the benefits of ICT include:
- Data analytics to support risk identification and new insights due to the increased availability of organization data in areas such as point-of-sale systems, payroll, cash, stock, fraud and metadata. I discuss how to extract these useful data sources in my paper on 'Beneath the data' linked below.
- Risk mitigation through linking up different systems of assurance and insurance both inside and outside the organization. I discuss this further in my paper on Monte Carlo linked below.
- Risk measurement and reporting, again using Monte Carlo to simulate thousands of possible risk scenarios, again using ICT tools.
On the other hand, due to the informational value of these data sources, there can exist obstacles to obtaining these benefits if data custodians are protective of their data, or if there are local legal impediments to obtaining data, such as data protection or privacy regulations. I have also found that data custodians sometimes exaggerate the legal impediments to avoid sharing data. So these can amount to behavioural obstacles.
Article Beneath the data: Using self-service business intelligence d...
Technical Report Increasing Internal Audit's Influence With Monte Carlo Analysis
I take financial analysis as an example. One of the major risks in financial systems is loss of data as well as inaccurate data. Data loss can happen in different stages of financial data lifecycle, especially in data transfer. This risk is multiplied by the number of IT systems an organisation may have, e.g. payroll, supply chain, etc.
Thanks to advancements in IoT and ICT, data can be transferred among different systems with ease and risk of data loss has decreased significantly. In addition, unifying data formats has helped these different systems communicate easily.
ICT and IoT have automated majority of data analysis tasks. These type of automations, will also reduce risk of human error and will lead to more accurate results.
Risk management systems are indispensable in any business. They allow the decision makers to measure the risk faced by the activities in order to take appropriate decisions. To achieve this, you need to have accurate information, well calculated,... this is when information technology can intervene to provide a good quality of information
Dariusz Prokopowicz - Nice topic. Information Communication Technologies ... ICT. The term has been around long enough, however, often overlooked is the wide-ranging level of ICT infrastructure that operate in our global environment. Within certain areas/ hubs one can see very advanced ICT systems providing real-time risk analyses based on multiple scenarios, etc .... others .... not so much. Users may sometimes fall under the presumption that all ICT systems are equal thus provide the same level of feedback and analyses.
The potential for further improvement may lie within increased use of AI to self-interrogate and identify changing risk profiles and/or threats.
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