Harnessing the potential of digital technologies and data is key to staying relevant in the IT space. Digital transformation, or the adoption of emerging and foundational digital technologies, creates new opportunities and risk alike. “Organizations will not remain competitive unless they radically adapt to the demands of the digital era,” reads a Harvard Business School survey publication.1 Part of this adaptation—and key to digital transformation—is understanding the benefits of adopting transparency and accountability within an organization.
Transparency enables organizations to embrace data and use them to make better, faster decisions; encourages staff to challenge the status quo; creates a dynamic understanding of customers; allows for distributed decision-making and co-creation; and promotes continuous experimentation and learning, ethical decision-making and proactive governance.
Transparency also creates accountability. Digitizing a business process requires information governance with heightened transparency and accountability in the organization. For example, throughout data integration, data exchange, and supply chain management, transparency in business can be used to market better products and secure future viability for customers. Additionally, if processes and their statuses are digitally monitored, executive management has more faith in how things are done. Therefore, well-documented processes and a transparent workflow boost an organization's visibility.
Without transparency and accountability, an organization will have its workflow disrupted by a lack of vision and inconsistency. Transparency can also eliminate unnecessary frustration by offering a clear view of the cause of any problem that an organization may face. Implementing transparency and accountability tools during digital transformation in systems and algorithms helps protect users and enterprises against undesirable results and ensures the application of appropriate policies, procedures and laws to the digital environment.
Industry 4.0 and Its Implications for Digital Transformation
Coinciding with digital transformation, a host of new technologies comprising the intelligent ecosystem are rapidly advancing the Fourth Industrial Revolution (4IR or Industry 4.0) and changing business in profound ways. Software as a Service (SaaS), the cloud, the Internet of Things (IoT), artificial intelligence (AI), robotics, blockchain, and 5G networks are all contributing factors to Industry 4.0. The lack of powerful tools for promoting transparency, accountability and effective audit is a major obstacle in the complex processes and supply chains of Industry 4.0. Due to the conflicting needs to innovate and mitigate risk, digital transformation has been slow.
A host of new technologies comprising the intelligent ecosystem are rapidly advancing Industry 4.0 and changing business in profound ways.
The mentioned Harvard Business School survey asked executives to rate the progress of their enterprises’ digital transformations.2 Those who had been on their digital transformation journey for more than 5 years reported the most headway. Unfortunately, slow adoption of risk management is all too familiar in many sectors where organizations undertake large-scale digital transformations. The focus is all too often on how to be more digital, move at speed, use data to make decisions and respond rapidly. Risk and compliance are only afterthoughts. Organizations must pay more attention to implementing digital risk management processes for improved control of assets and security against threats.
Auditing Digital Transformation Technologies and Tools
For digital transformation to be successful, performing timely digital transformation audits is as important as executing a digital strategy that keeps up with the pace of advancements. Assessing the impact of risk on digital technologies is imperative to their successful adoption. But there is no need to reinvent the wheel. Risk can be addressed by extending existing approaches to managing enterprise risk. An audit should strike the right balance of ensuring (i.e., providing traditional assurance), advising (i.e., acting as a trusted adviser) and anticipating (i.e., prepare for new risk).
Some of the tools auditors can use to enable digital transparency and accountability include:
- Cognitive technology—This tool uses algorithms that enable software to absorb information, reason and think in a manner similar to humans. It can plow through vast tracts of data and perform digital analyses of the data in ways that are impossible to do manually, even with entire teams of auditors.
- Predictive analytics—This is the use AI and machine learning (ML) for data analysis to make predictions based on future probabilities.
- Smart digital hubs—These are fintech-introduced inventions whereby auditors can work remotely and in real time utilizing data and analytics, automation, and visualization.
- Avatour—This tool allows users to host virtual tours, remote inspections and training sessions in real time without sacrificing quality.
Web 3.0 and Its Dark Side
One of the most significant forms of ongoing digital transformation is the rise of Web 3.0, which is widely considered the next phase of the Internet. Web 3.0 is expected to be decentralized and powered by cryptocurrency-based economies. Web 3.0 elements include decentralized finance (DeFi), non-fungible tokens (NFTs) and play-to-earn gaming, among others.. It will run on the blockchain network and make use of AI, ML, cryptocurrencies, and spatial or 3D graphics data representation to change the online experience.
But there are potential downsides to Web 3.0 that are worth investigating. For example, Ethereum Name Service (EN) makes it easy to send and receive cryptocurrency and access websites by entering simple names (e.g., Sophia.crypto) rather than by long, complex strings of letters and numbers. This presents a risk that third parties might attempt to impersonate brands (e.g., cisco.eth, wellsfargo.eth). ENS domains are recorded on the blockchain and cannot be easily removed through trademark disputes.
Social engineers/whales can identify real-world identities and physical locations using a registered ENS domain. This brings to mind the privacy issues of ICANN, in which the development of the “WHOIS” privacy policy took nearly a decade due to right to privacy vs. disclosure issues.3 Other ENS domain issues include fake customer support agents, the verification process for lost wallet keys, and the signing of malicious smart contracts and handing over of nonfungible tokens (NFTs).
With the rapid development and initiatives surrounding Web 3.0, a decisive and holistic security measure should be applied to curb the gruesome threat of hacking and exploitations. It is important to note that Web 3.0 has a built-in security system that makes it impenetrable to hackers and any form of cyberattacks. Yet, DeFi and other components of Web 3.0 are a single lapse away from being susceptible to attack.
Mitigating the Risk of Web 3.0
Risk in Web 3.0 is often more damaging than in traditional applications. For example, the events related to smart contracts are often irreversible and contingent.
Web 3.0 risk can be mitigated by:
- Stakeholders collaborating with the industry on security resources and intelligence
- Raising awareness of Web 3.0 market and trust dynamics and embracing different blockchain designs to apply security principles more strategically
- Incorporating Web 3.0 projects into security governance
- Applying attack prevention techniques
- Ensuring that contracts and code are independently analyzed and audited
Conclusion
Digital transformation increases access to digital data. But mere access to data does not mean that they can be used irresponsibly. If measures of transparency and accountability are not regularly put into practice, an organization can be exposed to financial, legal and reputational liabilities. Organizations can build transparency and accountability by proactively advocating for them and explicitly communicating that they are key elements of successful projects and overall organizational culture. Support for transparency and accountability can be garnered by establishing policies, deploying tools and regularly engaging in activities that promote transparency and accountability. Taking these steps helps organizations enable operational efficiency through monitoring, prevent fraud and corruption, and foster an ethical culture.
Endnotes
1 Hill, L.; A. Le Cam; S. Menon; E. Tedards; “Where Can Digital Transformation Take You? Insights from 1,700 Leaders,” Harvard Business School, Cambridge, Massachusetts, USA, 31 January 2022
2 Ibid.
3 Internet Corporation for Assigned Names and Numbers, “Thick WHOIS Policy Development,” USA
Sophia Bekele, CISA, CGEIT, CCS
Is a business leader, enterprise executive and international entrepreneur whose experience spans both the public and private sectors. She is a thought leader focused on global policy, enterprise governance, technology, and development issues, and an investor and philanthropist. Bekele has experience working for Fortune 500 companies including the Bank of America, Mitsubishi Bank of California, and PricewaterhouseCoopers (PWC), in the fields of business and technology, systems security auditing, risk management and enterprise systems. Bekele is a strong advocate for accountability and transparency improvement in all facets of her engagements and holds public authorities and the private sector to high standards.