Embracing new technology is imperative for any business that wants to remain competitive in the modern economy. However, emerging technology can be a double-edged sword, bringing unprecedented growth opportunities but also opening up new vulnerabilities. As companies level up their innovation game, 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 locks you need to secure your property against unauthorized access.
What are the 8 Types of Digital Risk?
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. Let’s take a look at the most common:
- Financial: Modern digital payment systems make it easy for customers to complete transactions. However, 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: Digital operational risk refers to the possible negative 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: Customers, shareholders, and other stakeholders can lose trust in the aftermath of incidents that should have been foreseen and mitigated in advance. 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. But 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 CCPA, CPRA, or the GDPR.
- Compliance and regulatory: Many forms of data and private information are subject to specific compliance and regulatory requirements. Legislation such as HIPAA, CCPA, CPRA, or the GDPR have strict requirements governing how data should be collected, stored, and transmitted.
- Third-party: Companies frequently need to give vendors access to internal systems. This leaves organizations 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 organization’s bottom line. So, how do you implement effective digital risk management 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 managing digital risks, you need to first assess the technologies you have deployed and evaluate the associated vulnerabilities.
For digital risk management to be effective, you must craft a mitigation strategy for each threat your organization is 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 from the growth equation, but it can be mitigated. Effective digital risk management does not happen overnight, nor is it a one-and-done solution. It must be an ongoing process that businesses integrate into their operations by following these steps:
- Identify risks: The first stage of any digital risk management program is to identify the risks your organization is currently facing. This is done by examining your exposed assets and then determining what vulnerabilities these elements carry by performing a business impact analysis (BIA). It’s also important to assign digital risk management ownership early on. Someone in your organization needs to be responsible for ensuring that your digital risk management strategies are effective.
- Prioritize risks: Using the asset and impact data collected in the first step, you can begin to prioritize risks based on impact. No organization can devote unlimited resources to risk management, so prioritization helps guide the focus of the overall program to ensure the most important are dealt with first.
- Create incident response plans: For each risk identified, from cyberattacks to data leaks and everything in between, your organization needs an incident response plan. These can ensure you have a coordinated, consistent, and specific approach to responding to digital disruptions. Common elements of an incident response plan include detection guidelines, containment procedures, analysis requirements, notification plans, and recovery strategies.
- Continuous monitoring and improvement: The threat landscape is constantly evolving, especially as organizations increasingly lean into digital transformation. This makes ongoing oversight and optimization of your processes a critical component of digital risk management. Implement key risk indicators (KRIs) to help you evaluate your company’s security posture and track your risk management performance over time. To keep on top of new threats, provide ongoing up-to-date training for all your employees.
How Sift Can Help with Digital Risk Management
From account takeovers to compliance, the many forms of digital risk can cause significant financial, legal, or reputational harm to your business. Effectively managing these challenges requires you to understand your organization’s unique needs and adopt a specific mitigation plan for each risk.
Sift offers a comprehensive approach 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 behavior and unauthorized account activities, enhancing security across the board. This allows Sift to stop fraudsters from activating new accounts as well as block unauthorized 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 customizable, 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.
Learn more about how Sift helps companies turn risk into revenue and grow securely.