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AI, cloud and the use of blockchain are transforming businesses, but what are the risks?
Advanced technologies are catapulting businesses forward and driving transformation across all industries. These technologies give organizations the ability to adopt newer business models, newer types of digital assets and greater flexibility by unlocking the value of data at scale.
But innovation powered by advanced tech brings new risks and challenges, such as changes to existing enterprise-wide risk frameworks, new and modified controls and navigating regulatory change. These technologies are often supporting existing processes (such as financial reporting over new business models/digital assets) and service commitments made to clients. As a result, controls over existing processes and reporting commitments such as System and Organization Controls (SOC) 1 and 2 would also need to evolve.
Identifying, understanding and addressing the risks, while capturing growth opportunities offered by these new technologies, is key. Organizations that do it right can reap the benefits of innovation while building trust with stakeholders.
Organizations are accelerating their cloud migration for a number of reasons: improved resilience and agility, cost savings, product and service innovation, enhanced security and higher profits. But acceleration has only heightened the focus on potential risks.
Moving to the cloud requires organizations to reassess their environment to identify changes in risks and the related controls response to those risks resulting from the move. Adopting the mindset that the cloud service provider is solely responsible for controls is not sufficient; cloud service customers must consider how responsibilities are shared based on the nature of the cloud services they consume, what risks are relevant to their environment and what residual risk needs to be addressed internally after considering the controls operated by the cloud service provider.
PwC can help you evaluate the impact of your cloud migration to your internal controls over financial reporting, perform a risk assessment and provide you with an independent perspective on the adequacy of your response through execution of pre- and post-implementation reviews. We can take that assurance one step further, extending the trust your organization has built in your cloud migration to your customers through SOC 1 and SOC 2 reporting.
The entry of institutional players, increasing demand for alternative assets such as cryptocurrencies, NFT and other tokens, regulatory clarity and enforcement and the mainstreaming of the crypto ecosystem have all contributed to the rise in digital assets. These new forms of asset ownership and monetary exchange, driven by technology, are advancing as quickly as new providers are emerging. But, given the complexity of crypto-assets and the general lack of understanding about the ecosystem and lack of skilled resources, organizations must be able to understand and manage the risks.
PwC can help you navigate the digital asset ecosystem and the evolving regulatory landscape, while maintaining and building trust in your internal controls environment via SOC reporting.
Organizations are using AI and machine learning to help increase the speed and efficiency of decision-making in a range of use cases. A few examples include using machine learning in security incident log reviews or providing recommendations to resolve reconciliations or compliance violations. But AI technologies must be managed properly to avoid unintended bias, and to be able to explain the rationale behind the ultimate outcome. These are significant risk factors that could impact company obligations under ever-evolving regulatory requirements.
PwC can provide assurance over the application of AI and machine learning, bridging the confidence gap and enabling consumers and regulators to determine the trustworthiness of AI machine learning algorithms.
Crypto toolkit podcast series
Tune in to hear insights on accounting for transactions involving crypto assets.
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