Data breach vulnerabilities. Social media issues. On-demand service challenges.
These dynamic and challenging trends are the topic of the latest issue of PreView, Protiviti’s emerging risks newsletter. The latest issue scans the landscape of the increasingly data-rich and hacker-vulnerable online economy and spotlights the challenges and opportunities posed by this increased data availability; it also casts a look at the benefits and pitfalls of social media in the business environment, the accelerating impact of technology in fulfilling consumer needs in parallel with the generational shift of millennials toward collaborative and on-demand commerce providers, and more.
Please download and read the full newsletter at your leisure. Here are the highlights:
Data Breaches: Hundreds of millions – that’s the typical volume of records exposed when industry-leading companies and household brands get hacked, as they did at alarmingly regular intervals during 2013 and 2014. In fact, in 2014, data breach activity reached a record high, resulting in more than 1 billion compromised records and underscoring the heightened capabilities of hackers to obtain sensitive information.
The greater occurrence and visibility of such incidents are leading to interesting developments. Among them:
- A growing interest in cyber liability insurance, to mitigate the risk of a potential large-scale breach. In 2014, spending on cyber insurance nearly doubled from 2013 – to roughly US$2 billion.
- Increased regulatory attention and oversight, including penalties designed to ensure sound cyber risk management practices. The Securities and Exchange Commission, for example, is considering measures to compel organizations to disclose expanded information about cybersecurity vulnerabilities in their financial statements.
- Rising attacks on healthcare organizations due to the high desirability of patient medical records among cybercriminals. Health records, which can be exploited for identity theft, false insurance claims and drug prescriptions, fetched 20 times more on the black market than the traditional object of cybertheft, credit card numbers.
Social Media Interactions with Consumers: As social media becomes omnipresent, companies need to be especially focused on how they use this channel to interact with consumers. Failure to manage customer expectations can unleash waves of complaints and go viral in a matter of hours. Consumer expectations are changing as a result of social media as well, with 42 percent of consumers now expecting a response and issue resolution to happen within an hour, including on weekends.
In addition, 50 percent of journalists now state they use social media accounts as their main source of information. This means that social media-enabled public conversation between companies and their customers can spill easily into major news cycles causing a potential reputational crisis – all this underscoring the importance of carefully managing this public relations channel.
Crowdfunding: Crowdfunding took root during the 2008 recession as a nontraditional way of seeking funds for a project or venture – typically by raising small amounts of money from a large number of people through the Internet. For a number of reasons, among them shifting generational attitudes in favor of collaborative business models, crowdfunding has continued to gain acceptance, and is attracting the attention of supervisory bodies seeking to regulate this type of funding, and of financial institutions, which view it as a new competitive threat. Crowdfunding offers both a great opportunity to streamline the funding process for entrepreneurs and investors by eliminating the intermediary, and an increased risk of uncertainty for both parties – something regulators are beginning to look into and design measures to address.
On-Demand Services: Uber has revolutionized transportation in cities by providing cheaper alternatives to cabs via mobile technology. Airbnb, with over 800,000 listings across nearly 200 countries, is among the largest hoteliers in the world – and it was founded just seven years ago. Such on-demand service companies – capitalizing on technology and evolving consumer preferences – are creating new risks for users and competitors, and facing challenges themselves.
One such challenge is these providers’ reliance on mobile platforms, making them vulnerable to data glitches, service failures and information security breaches that pose risks to providers and users alike.
For traditional companies, on-demand spells a need to adjust their business models to meet new consumer demands – or risk losing market share. However, those that incorporate on-demand services in their business models are not assured of risk avoidance: regulatory, operational and reputational risks all can rise, and need to be watched and managed correctly.
These are just a few of the highlights in our latest issue of PreView; click here to access the full newsletter and let me know your thoughts in the comments section.