Digital risk management, as the name suggests, refers to putting countermeasures in place to stop the spread of digital risk. Because embracing new technology is imperative for any business that wants to remain competitive in the modern economy, digital transformation is inevitable.
Emerging technology can bring unprecedented growth opportunities, but opens up new digital vulnerabilities and avenues of attack. As companies continue to innovate, so do fraudsters.
In this blog, we break down digital risk management and uncover the best way to scale your business without exposing it to vulnerabilities.
What is Digital Risk?
Digital risk refers to any potential threat or vulnerability related to digital transformation. When a company adopts a new technology, it often increases the number of access points left exposed to fraudsters. Think of it like adding more exterior doors to a building. The more doors you add, the more customers can enter, but the more locks you need to secure your property against unauthorised access.
In order to ‘watch every door,’ you’ll need to have an effective form of digital risk assessment to understand where the threats are coming from and in what volumes. After you evaluate your present and potential threats, you can start to build a digital risk management framework.
What are Common Digital Risks?
The main types of digital risk are financial, operational, reputational, cyberattacks, account takeovers, data leaks, regulatory, and third-party. The first step toward building a digital risk management framework is to become familiar with the main categories of digital risk. By estimating their likelihood and possible effects, you can make a plan for tackling each based on priority.
Financial digital risk
Modern digital payment systems make it easy for customers to complete transactions, but they’ve also increased the opportunities for fraudsters. There are a multitude of categories of payment risk, including card-not-present fraud, phishing, chargeback fraud, and card testing.
Account takeovers
Technological vulnerabilities increase the risk of account takeovers (ATOs) and stolen credentials. ATOs occur when usernames and passwords are stolen and then used by cybercriminals to take control of accounts and make fraudulent purchases.
Operational risks
Digital operational risk refers to the potential consequences associated with a company’s technology. Digital systems can fail due to misconfiguration, natural disasters impacting servers, or cyberattacks. Technical problems can lead to service outages and supply chain disruptions.
Reputational risks
Customers, shareholders, and other stakeholders can lose trust in the aftermath of incidents that they feel could have been preempted and mitigated. This can result in lost business and higher customer acquisition costs.
Cyberattacks
These attacks are used to steal information from private and confidential business systems and records. Cybersecurity risks come in many varieties, including data breaches, distributed denial of service (DDOS) attacks, and phishing emails.
Data privacy risks
Technology enables data to be accessed, changed, and moved faster than ever before. This also raises the risk for deliberate data breaches or accidental leaks that expose sensitive information. Failing to adequately protect sensitive data can result in violations of strict privacy laws such as UK GDPR, DPA 2018, or PECR.
Compliance and regulatory digital risk
Many forms of data and private information are subject to specific compliance and regulatory requirements. Legislation such as UK GDPR, DPA 2018, PECR, or sector-specific regulations have strict requirements governing how data should be collected, stored, and transmitted. UK organisations should also align with NCSC’s frameworks (e.g. the ‘10 Steps to Cyber Security’), IASME Governance, and prepare for upcoming changes from the Cyber Security and Resilience Bill.
Third-party digital risk
Companies frequently need to give vendors access to internal systems. This leaves organisations exposed to third-party risk in the form of software vulnerabilities, non-compliance, and data breaches.
Failing to anticipate and mitigate these risks can seriously damage your brand, leave you exposed to lawsuits and legal penalties, and ultimately impact your organisation’s bottom line. So, how do you implement effective digital risk management assessment and prevention?
How Does Digital Risk Management Work?
There is no one-size-fits-all approach to digital risk management, because each business adopts a variety of technologies at different stages. To start implementing a digital risk management framework, you need to first assess the technologies you have deployed and evaluate the associated vulnerabilities.
For digital risk management to be effective, you must perform a digital risk assessment and craft a mitigation strategy for each threat your organisation may be exposed to. These plans should outline how your business will use guidelines, training, and procedures in combination with software and technology to address these vulnerabilities.
How to Implement Digital Risk Management
Risk can never be entirely eliminated, but it can be mitigated. Effective digital risk management must be an ongoing process that businesses integrate into their operations. Generally, UK SMEs pursue IASME ‘Gold’ certification (aligned with Cyber Essentials) to systematically reduce third-party and supply-chain exposure.
Identify risks: Examine your exposed assets and determine vulnerabilities by performing a business impact analysis (BIA). Make sure to assign digital risk management ownership early as someone needs to be responsible for your digital risk assessment and management strategies.
Prioritise risks: Using the data collected in step one, prioritise risks based on impact. Prioritisation helps guide the programme and mitigate resource expenditures.
Create response plans: For each identified risk, develop an incident response plan. These keep your organisation coordinated and consistent whilst responding to digital disruptions. Common elements in a response plan include detection guidelines, containment procedures, analysis requirements, notification plans, and recovery strategies.
Continuous monitoring and improvement: Threats are constantly evolving, especially as organisations lean into digital transformation. Ongoing process oversight and optimisation is important, so implement key risk indicators (KRIs) to routinely evaluate your security posture and track risk management performance, and update employee training. Many UK organisations use KRIs aligned with ICO and NCSC standards, integrating them into dashboards that track compliance across PECR, UK GDPR, and DPA obligations.
How Sift Can Help with Digital Risk Management
Sift offers a comprehensive approach to UK businesses when it comes to fighting various forms of online fraud and abuse by employing AI-powered technology and leveraging a massive network of over 1 trillion global events. For account creation and ATO fraud, real-time machine learning models pinpoint risky user behaviour and unauthorised account activities, enhancing security across the board. This allows Sift to stop fraudsters from activating new accounts as well as block unauthorised access to trusted customer accounts and protect their personally identifiable information.
When it comes to payment fraud and money movement, Sift’s platform is designed to detect and block risky transactions instantly, covering key risk points and payment types to protect businesses as they scale. This approach integrates AI-led insights and a customisable, flexible fraud prevention system built for your business’s specific needs. Sift enables you to innovate confidently in new spaces like neobanking, cryptocurrency, and digital wallets, securing the entire customer journey.
Sift also tackles policy abuse by using a powerful rules engine to identify and deter fraudsters, thereby helping you maintain policy compliance without alienating genuine customers. Sift’s multifaceted solution not only addresses direct financial risks, but also mitigates operational costs and helps businesses reallocate resources to their most pressing challenges.
