Due to evolving regulations, most financial services firms are now undertaking digital transformation projects to remain competitive in an increasingly digitised environment. This will involve the shift toward a constant state of operational resilience, which will require a significant transformation from the manual style of legacy systems. Digital transformation also brings additional responsibilities, such as an enhanced risk of third-party services, particularly with the use of cloud-based services.
What are the Main Resilience Risks of Digital Transformation?
The process of digital transformation can create several significant resilience risks that need to be carefully managed, with the most significant of these risks being data migration. The migration of vast amounts of data from legacy systems to cloud-based infrastructure can cause data loss, corruption or security breaches during the transition. It also generates additional third-party risks as a successful migration process relies on the security and resilience of third-party cloud service providers. Any form of change process can create temporary vulnerabilities that must be managed, but digital transformation in particular brings unique risks. The transition from outdated, legacy systems often renders established internal controls and processes obsolete. Firms must conduct a new, comprehensive mapping of their dependencies to identify and remediate these gaps. This will ensure that their operational resilience frameworks evolve in line with their technology.
How can Firms Integrate Resilience into Change Management Processes?
To manage these risks, operational resilience must be a fundamental component of the change management process, fully integrated from the outset. This will require firms to adopt a resilience-by-design approach, where risk management is much more than a simple tick-box exercise and is at the core of every transformation project. Integrating resilience into change management processes will depend on an extensive mapping exercise of all risks, including interconnected supplier risks. This process should use dynamic real-time tools for mapping and updates wherever possible to ensure the quality of information being used. Throughout this modernisation process, legacy systems must be maintained and run in parallel until the new systems are proven to be resilient and the data migration has been completed. This process will involve extensive pre-launch testing in a secure digital environment such as a sandbox, and firms will be required to identify and remediate vulnerabilities before going live with changes in a customer-facing environment. Digital transformation and operational resilience should be viewed as two parts of the same integrated strategy to build a modern, secure and compliant financial services model. Firms must adopt a proactive approach using resilience-by-design and utilise modern tools to reduce the downtime needed for implementation. This process will help firms manage change and build in genuine resilience in digital transformation projects without causing costly downtime. Navigating digital transformation?
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