Blockchain risks and how to handle them
Most experts agree that blockchain has the potential to fundamentally change the way organisations are managed and business is conducted. The technology will likely help minimize or even eliminate certain structural risks that companies currently have to deal with. However, like any new technology, especially one that is so profoundly innovative, its introduction carries risks. The ability to identify and manage these risks will prove decisive for the success of any company seeking to implement blockchain technology in its organisation.
First of all, there are the usual risks associated with the introduction of any new technology within an organisation. The development of blockchain is progressing quickly and different variations of the technology have already entered the market, with many others poised to follow. This means an organisation considering blockchain will have to answer fundamental questions such as ‘When to invest?’ and ‘What exactly to invest in?’ Finding the right answers to such questions is not easy, and undoubtedly involves substantial risks. Likewise, introduction of the new technology within an organisation will require adaptation of other technologies and systems used, in order to achieve the desired efficiency.
Although one of the main benefits of blockchain technology lies in the transaction security it is able to offer, there are still considerable security risks connected to its use. The possibility of cyberattacks and technological failures is by no means excluded, potentially leaving the organisation exposed to operational as well as reputational risks.
Finally, blockchain and the smart contracts at the core of its technology are also clouded by legal and regulatory uncertainty. As of yet, it is still unclear if, when and how blockchain will be regulated, how smart contracts can be legally enforced and how disputes around the technology will be resolved. For instance, it is still uncertain what happens when a transaction is settled within the blockchain network, but is subject to a dispute between the parties afterwards.
All this leads to the conclusion that even though blockchain undoubtedly has big potential, caution is required. Anyone thinking of implementing it should not be blinded by the benefits of the technology, and be well aware of the risks. A well-thought-out plan, which addresses the risks and lays out a clear vision, is a must. Seeking expert advice regarding the legal and technological specifics is strongly recommended. Only then will it be possible to reap the benefits of this revolutionary new technology, while minimizing its inherent risks.
Thought-leadership contributed by Daniel Agranovich, Global Risk Community.