We live in a world that is more connected than at any other point in history. Individuals and businesses can connect with each other in seconds, can share pictures, videos, work documents and much more via cloud-sharing tools with ease.

Such speedy and effective connectivity has proved a true asset to many organisations and transformed the way in which many of them operate. Yet at the same time, there is also more risk in the world than ever before. Business risk comes in many different guises in 2017. Strategic, reputational, compliance, financial, political….the list goes on and on. The breadth, depth and variety of risk in modern business make the task of efficient, effective and smart risk management even harder for many organisations.

But in the increasingly connected world in which we live and work, in conjunction with this increased risk, a perfect storm has emerged, and there is a new threat starting to make itself felt, that of connected risk. What exactly is this and how can organisations – especially those within financial services (FS) and fintech – best defend themselves against it?

Ultra-connectivity in business

The world in which we live and work is more connected now than at any other point previously. We live in an era of ultra-connectivity, and it is an era that impacted the FS sector as much as other industries. Technology has progressed to the extent that money can be transferred across countries and continents, changed into different currencies and deals agreed at the click of a button.

Businesses are global now, still operating in their country of origin, but present in many territories all over the world. There are compliance and regulatory issues to be managed when doing so of course, but it is relatively easy now for an agile fintech business or even a traditional FS firm to trade globally.

But the ease of digital communication in connecting these organisations is also a weakness.  Risk can be spread within moments, and the hyper connected world that we operate in is increasingly under threat from this connected risk. A typical FS business would be digitally connected with a wide variety of other organisations – partners, customers, suppliers, legislators and more – which means that the risk is cumulative and can be spread rapidly.

Because these organisations are so digitally connected, one single threat is exponentially shared across them. And given the sensitive nature of FS – managing the finances of businesses and consumers, and holding all manner of data on them too – the risk is potentially greater than in other sectors.

So one relatively small local event, which in a pre-digital era would be confined to that area, can have global consequences, impacting organisations thousands of miles away and operating in a completely different sector. This could be anything from a supply chain issue to a political event, or as is increasingly likely, a cyber attack.

[easy-tweet tweet=”Cyber attack is the risk that is currently posing the greatest threat” hashtags=”CyberAttack, Security”]

Combatting connected risk

Connected risk can come in many guises, and given the spontaneous nature of some events it can be particularly hard to mitigate against. But the cyber attack is the risk that is currently posing the greatest threat.

With the internet of things so prevalent at home and in business, we have seen numerous instances so far in 2017 of cyber attacks being spread at high speed across the global, moving between interconnected organisations almost at will. Ransomware could be spread from a small business to its bank or other FS provider, which in turn could potentially be spread to all of its customers in countries all over the world.

A key element of managing and mitigating against connected risk is in equipping risk management teams with the right tools for the job. This means moving away from traditional approaches, such as Excel, and embracing digitisation for risk management.

By adopting an automated approach, it ensures a continuous and on-going protection against a multitude of threats. It also means that risk modelling can be far more effective. Using technology to amplify the weak signals within an FS organisation and predict when and where risk might occur and what the likely impact of it will be. This allows the business in question to prevent and prepare for risk far more effectively than they might otherwise.

If one organisation suffers from connected risk, it is possible that all the organisations it is connected with will also do so. That’s why it is growing ever more important to ensure an organisation has the proper defences.

It is impossible to dial back the connectivity now – it is too fast, too deeply integrated and has become an essential element of the modern business. But it is possible to mitigate against connected risk more effectively than is being done currently in FS, and doing so needs to start sooner rather than later.