Risks surrounding data and analytics are the primary concerns of chief audit executives (CAEs) for 2019, according to Gartner, Inc. Based on a survey of 144 CAE clients, Gartner has identified the major risks that boards, audit committees and executives need to prepare for in the coming year.
Pursuit of digital business models to drive growth has increased the amount of data collected and processed by businesses at a time when public and regulatory scrutiny is very high. This has led to heightened risks around data governance, which CAEs plan to watch closely.
Companies face major challenges in applying proper data governance, maximizing the value they get from data, and complying with the fragmented data regulation landscape, said Malcolm Murray, vice president of audit research at Gartner. Recent high-profile data breaches and increased public attention have raised the stakes for organizational accountability, and its only going to get tougher in 2019.
Data governance: New data privacy regulations such as GDPR and high-profile breaches have expanded the compliance, financial and reputational risks of data usage and protection. Although data-driven business strategies are necessary to increase efficiency and competitiveness, only 37 percent of organizations have formal data governance frameworks in place. As the complexity and volume of data increases, companies should implement formal data governance frameworks to mitigate the risks caused by security threats and privacy issues. Companies can develop a framework by first creating an inventory of data assets across the business and establishing a data classification policy. In addition, they should review data analytics training and talent assessments.
Third parties: As companies increasingly rely on partnerships for digital initiatives, they are expanding their reliance on third parties and fourth and fifth parties, if not even more. This amplifies their exposure to operational and regulatory risk. Nearly 70 percent of CAEs report third-party risk as one of their top concerns, but many organizations still struggle to account for and manage it. To help mitigate this risk, organizations must increase visibility into the operations of third parties and strengthen their focus on third parties information security behaviours. Internal audit teams can help by evaluating third-party contracts and compliance efforts, as well as investigating regulatory requirements for third-party data handling.
Data privacy: Although data can confer competitive advantages, recent high-profile security breaches show the negative impact of data privacy failures. In fact, data privacy is a top concern for organizations across the board. In response to GDPR enforcement uncertainty, companies must expedite implementation of GDPR mandates such as transparency, consent and breach reporting or risk regulatory fines and other sanctions. Organizations must also take steps to regain customers trust, or suffer a potential loss of customers. Gartner has predicted that more than half of companies affected by GDPR will not be in full compliance with it by the end of 2018.
Data-related risks continue to evolve, and CAEs have a key role to play in helping companies implement clear frameworks and repeatable processes to navigate this ever-changing threat landscape, said Mr. Murray.
In addition to data and analytics, other risk themes CAEs are watching closely for 2019 include IT vulnerabilities, risks stemming from cost and growth pressures, and the vastly shortened planning horizon that executives face.
This article was originally published by globalbankingandfinance.com.