Futurisks: Risk Management in the Digital Age

Table of Contents

1. Frontmatter

2. Introduction

   1. Frontmatter

   2. Chapter 1. The Impact of Emerging Technologies and the Future of Risk Management: A Strategic Perspective

      Halis Kiral, Gökhan Yılmaz

      Abstract

      This study explores the profound impact of digital transformation on enterprise risk management. It highlights the shifting dynamics of supply and demand influenced by technological advancements, evolving customer preferences, geopolitical tensions, and regulatory developments. Beyond building digital infrastructure, digital transformation requires organizations to rethink strategic decisions, business processes, and the legal and ethical frameworks governing operations. The paper identifies critical risk areas amplified by digital transformation, including cybersecurity, data privacy, compliance, labor, third-party dependencies, business continuity, environmental sustainability, and regulatory challenges. These risks are notable not for their novelty but for their far-reaching impact and rapid propagation, exemplified by significant global IT outages caused by seemingly minor technical issues. The article underscores the need for organizations to move beyond superficial digital updates and adopt transformative approaches to business models, processes, and structures. It offers actionable strategies for leaders to navigate the complexities of rapid technological change and turn emerging risks into opportunities.

3. Futurisk in Digitalization, ESG, Finance and Supply Chain

   1. Frontmatter

   2. Chapter 2. Unveiling the Shadows: Anticipating Future Cyber Risks and Their Impacts on Businesses

      Çetin Karahan, Hakan Velioğlu, Yenal Arslan

      Abstract

      In 2023, more than five billion people in the world are using the internet and they spend about seven hours on the internet every day. Such increased dependence on Information and Communication Technologies (ICT) requires individuals and businesses to approach cyber risks and emerging technologies with greater caution. If we do not count the reputation and moral damages of the business, cyber risks cost 8.4 trillion dollars in the world in 2022. Studies on the impact of cyber risks on organizations generally consider organizations as a whole and evaluate the impact of risk from this perspective. While the impact of a risk affecting one department can affect other departments, the impact of certain risks on some departments is much more direct. Our research covers a wide range of cyber security topics, including emerging technologies, legal implications, employee training, and the interconnectedness of cyber risks within an organization and also diverges from existing studies that primarily examine businesses as a whole and evaluate the overall impact of cyber risks from that view. By delving into the future cyber risks that potentially affect departments within organizations, our study offers a more granular and comprehensive understanding of the intricate dynamics between cyber risks and departmental operations. This approach allows for a more nuanced analysis of the specific implications and tailored strategies for assessing and mitigating cyber risks at the departmental level, providing valuable insights for practitioners and decision-makers seeking to enhance their organization’s cyber security posture and for academics working on cyber security.

   3. Chapter 3. Efficient Management of Supply Chain Risks in the Digital Age: A Theoretical Approach

      Konstantinos N. Malagas, Ayse Kucuk Yılmaz

      Abstract

      The supply chain mainly consists of a complex network of enterprises that operate in various regions and an uncertain and continuously changing environment. Therefore, a large number of risks impact the operation of supply chains. Those actual and potential risks should be efficiently and effectively monitored and managed by supply chain management. Toward the achievement of these targets, the implementation of a well-organized risk management system, the achievement of a high level of integration between supply chain members, and the quick and effective information circulation and dissemination through the extended use of novel digital technologies such as the Internet of Things (IoT), Blockchain and others, are vital. These three concepts are interrelated, and their successful implementation positively influences the supply chain’s risk minimization and operational performance. Grouping risks and developing the appropriate mitigation strategies are essential to identify and keeping risks under control and achieving resilience. In particular, the relevant literature suggests various groups and sub-groups of risks; endogenous/internal and exogenous/external risks are the main categories, and multiple sourcing, high flexibility, and strong collaboration between partners are the most common mitigation strategies. Moreover, emphasis on sustainable objectives and sustainability-related risks is needed. Supply chain operators based on collected and analyzed data with the assistance of new digital technologies and the implementation of the proper management system can successfully manage future risks. The study presents the issues mentioned above easily, clearly, and understandable for readers and provides valuable knowledge to practitioners and academicians.

   4. Chapter 4. The ESG Tool for Reducing Inadequate Climate Finance

      Ayşe Sıla Koç, İzzet Arı

      Abstract

      Combatting climate change requires immediate, tangible actions from all countries. Greenhouse gas emissions reduction, adaptation to rules on lower greenhouse gas emissions, financing mitigation and adaptation, technology development and transfer, loss and damage due to climate risks and mitigation efforts, transparency and accountability for greenhouse gas emissions are key elements of effective climate policy. The United Nations Framework Convention on Climate Change and the Paris Agreement are two main multilateral treaties for establishing a common language, understandings, commitments and solutions. Among all these actions climate finance is the most critical factor for enabling required actions. Both public and private finance mobilization with transparent reporting is one grey area in climate change. Initiatives for corporates and non-state actors have been trying to disclosure their actions according to corporate social responsibility or quasi-climate-friendly ratings. However, each rating institutions measure or report the how well the corporates perform particularly environmental social and governance (ESG) in a various way. One common scaling and metric might not seem to be urgently adjusted for the ranking of the ESG of corporates, but existing rating institutions will be demanded a common format or template for climate finance in ESG reporting. Besides, recently established in the COP-26, a special group namely International Sustainability Standards Board has been working on a global baseline for climate-related financial disclosure. This kind of baseline is so critical in developing countries and emerging economies for effective climate financial mobilization without greenwashing. The aim of this study is to overview and compare the current ESG rating and reporting for the sake of effective climate finance mobilization and investments without greenwashing. This study also assesses how ESG scores affect the investment decisions toward the transformation of green and low-carbon energy. This chapter is limited to available data from rating institutions including Bloomberg, S&P, MSCI, and Sustainalytics. It is highly recommended that a common ESG reporting guide or approach will provide transparent disclosure to all. The future of ESG will be shaped by investor consciousness on global risks such as climate change and opportunities including green transformation.

4. Futurisk in Emerging Technologies, Metaverse, AI and Digital Risk Society

   1. Frontmatter

   2. Chapter 5. Navigating the Dual Edges of Progress: Emerging Technologies’ Ambivalent Effects on Fraud and Financial Crime

      Gökhan Yılmaz

      Abstract

      The fast unfold of rising technology ushered in a period of change, redefining the global business panorama. While those innovations have extremely good capability for development and efficiency, additionally they pose massive risks that require careful assessment and early mitigation. In this chapter, we examine the many risk factors associated with emerging technologies and their close links in fraud and financial crime. By making assessments of these risks, we reveal their significant impact on companies. Also, in this chapter we discuss viable strategies that companies can undertake to meet these challenges again using emerging technologies. This study introduces a paradigm that enables corporate management to effectively harness the transformative potential of emerging technologies while also safeguarding against associated risks. Corporations should proactively address risks and capitalize on opportunities presented by the dynamic technological world by integrating ethical concepts, implementing cybersecurity measures, and adhering to international standards.

   3. Chapter 6. Metaverse: Opening the Doors to a New World with Opportunities and Threats

      Halis Kiral, Turgay Çağlayan

      Abstract

      Metaverse is a virtual universe that combines exclusive features of virtual reality, augmented reality, and artificial intelligence. It is a three-dimensional internet platform where users can interact with other users in a virtual environment by creating avatars or holograms that represent their own characteristics. It has the capacity to revolutionize the way people communicate, do business and collaborate with each other in the digital space. While it has the potential to offer new opportunities for businesses, there are also threats such as ethical violations, cybersecurity threats, privacy issues, and data misuse. This study aims to explore the opportunities and threats of the metaverse and to raise awareness about the need for being prepared for the potential opportunities and threats that businesses operating in different sectors may face when they exist in the virtual universe.

   4. Chapter 7. Artificial Intelligence from an Ethical Perspective

      Gökben Bayramoğlu

      Abstract

      Artificial intelligence is spreading to all areas of life day by day. Artificial intelligence, with a great potential to find solutions to the fundamental problems of humanity, has also sparked off many debates such as being human, privacy, transparency, trust, etc. Respecting ethical sensitivities while developing artificial intelligence is an issue that is too important to be left solely to the initiative of the engineers and software developers who design the system. Considering its potential consequences, the ethics of artificial intelligence is clearly a serious issue that requires the initiative of social scientists, philosophers, engineering sciences, governments, and society itself. In this study, artificial intelligence ethics is analysed in terms of the sub-dimensions of the issue, namely, data ethics, algorithm ethics, and application ethics, and possible risks are discussed.

   5. Chapter 8. Infodemic in the Context of the Digital Risk Society

      Bahar Kayıhan

      Abstract

      One of the risks of today and the future in the digital risk society is the infodemic. Infodemic, which is too much information containing false or misleading information, threats to the everyday life of people. Infodemic is an inevitable part of world risk society, and the more we try to control it, the more real it will become. But if we cannot control it, the false information circulating in digital and physical environments can cause situations such as fear, uncertainty, inappropriate practices, rejection of measures, marginalization, and polarization. Therefore, trying to prevent the infodemic is the sine qua non of the second modernity we live in. For this reason, in this study, the meaning of infodemic and solution suggestions for infodemic are emphasized. As a result, it was seen that against circulating disinformation, putting the right information into circulation through social media platforms will reduce the infodemic. Authorities’ explanations and verification platforms are also vital in the fight against the infodemic. Moreover, Eysenbach’s Cake model should also be considered in the fight against the infodemic. His model mentions four stages in tackling the infodemic. These are to facilitate accurate information, and filtering processes at all levels, to develop literacy, and to monitor and analyze the data and information. Moreover, to analyze data and convey accurate information to the public, science journalism should be considered. In addition, through crisis and risk communication units to be established in institutions and companies, accurate information about risks threatening people will be delivered to people instantly.

5. Futurisk in Decentralized Finance, Labor Market, Institutionalization and Strategic Management

   1. Frontmatter

   2. Chapter 9. The Future of Decentralized Finance and Business

      Ali Kırbaş, Ecenur Uğurlu-Yıldırım

      Abstract

      While traditional financial intermediaries are often seen as crucial in reducing transaction costs and addressing information asymmetry issues, the rise of decentralized finance (DeFi) has the potential to diminish or even eliminate the need for such intermediaries and central authorities. DeFi functions on a decentralized network where information is publicly shared, validated through dispersed consensus, and stored across multiple peers to establish distributed trust using blockchain technology. This chapter intends to explain the conceptual framework of DeFi, its advantages and drawbacks, and its business models. Furthermore, the chapter explores how the future of the banking industry and DeFi might evolve. Although there are some disadvantages to DeFi, it appears to be a viable alternative to traditional finance. While a hybrid approach may be more likely at present, it would not be surprising if DeFi completely replaces financial intermediaries in the future, with technological advances overcoming current limitations.

   3. Chapter 10. Labor Market and Risks in the Digital Age

      M. Caglar Ozdemir

      Abstract

      This study aims to discuss the change and possible risks of the increasingly differentiated labor markets by blending with the digital world. In the study, evaluations were made on the topics of “labor market entropy,” “the resistance of the traditional structure,” “transformation difficulties and risks in the talent competence spiral,” “sustainable economy” and “new generation sectoral favorites,” “the need to redefine productivity,” and “the shining sectors.” The study, which is based on a literature review, designed in an exploratory and inferential structure, seeks an answer to the question “What kind of world awaits us?” As a result, it has been evaluated that the world is on the verge of an enigmatic transformation and that we are moving toward a process where the traditional structure’s habits are likely to be reversed.

   4. Chapter 11. Institutionalization in the Digital Age

      Hakan Karabacak

      Abstract

      Technology and digitalization has significant impacts on societies and the business world, leading to transformations in all areas of social and economic life. The digital transformation trend is expected to continue in the future. Institutionalization and digitalization both influence and are influenced by each other. These reciprocal effects can be positive or negative for businesses. Instead of considering institutionalization and digitalization as independent processes, businesses should ensure the harmony and compatibility between them. Although there is a large body of literature on each of digitalization and institutionalization, the conceptual links between the two fields have not been directly addressed. This study discusses the interplay between institutionalization and digitalization by incorporating a future-oriented perspective and defines the institutionalization culture in the context of the interactions between businesses and technology in the digital age. The business world of the future, which will be shaped and transformed by technology, will further increase the need for institutionalization culture for businesses. Thus, this study identifies three key areas of focus where institutionalization culture in the digital age needs to address: (1) the relationship between the business and its environment, and the channels through which technology and digitalization affect businesses; (2) human resources in the business and their interaction with technology; (3) governance structures and their interaction with technology.

   5. Chapter 12. Future of Strategic Management in the Digital Age

      Mustafa Çolak, Hayat Ebru Erdost Çolak

      Abstract

      This study aims to explore the implications of the digital age for the future of strategic management. It makes this assessment in connection with five main issues that are at the center of the field of strategic management. In particular, this study attempts to explore the future of strategic management with regard to the influence of the digital age on five forces model, strategic planning, competition, industry boundaries, and competitive advantage. The most important conclusion reached out of this assessment is that the digital age has impacted, and is likely to continue to impact, these five aspects of strategic management in significant ways.

6. Futurisk in Blockchain, Business Continuity, Cryptocurrencies and Smart Contracts

   1. Frontmatter

   2. Chapter 13. Legal and Compliance Risks of AI and Blockchain Technologies

      Merve Aysegül Kulular, Mahmut Furkan Balaban

      Abstract

      The transborder impact of information technologies on the economy across finance, entertainment, healthcare, and supply chains might be claimed to be meteoric. The effect of the digital environment advances companies through free competition. However, compliance with AI and blockchain technologies requires significant time, effort, and money. The use of AI and blockchain technologies also demands users for sustainability. This study introduces the legal challenges of financial technologies focusing on AI and blockchain systems for business and consumers. In this chapter, the features and usage era of AI and blockchain technologies are analyzed through economic and legal perspectives. Considering transboundary transactions of blockchain and AI technologies and relevant risks, revision on AI or blockchain-relevant law should take both domestic and international measures into account. Companies preferring to use financial AI systems that involve high risk are proposed to use blockchain technologies for technical surveillance countermeasures. In this regard, blockchain and AI might be an effective way to secure both consumer’s privacy, personal data, and companies’ any data relevant to transaction against threats such as computer intrusion. Accordingly, EU regulations are discussed to analyze AI liability. The chapter questions whether legislating and AI systems are justified with regard to conflict of the laws and difficulties on de-anonymization of blockchain-based transactions. This study analyzes the compliance risks of AI as a type of fintech and proposes regtech as a solution, introducing crypto courts.

   3. Chapter 14. Future Risks Through the Perspective of Business Continuity

      Sevgin Zorlucan Eke

      Abstract

      Throughout the entirety of human history, from the primitive era of our cave-dwelling ancestors to the contemporary digital age, the task of predicting the daunting potential dangers and threats has remained one of the most formidable challenges that humanity has ever faced. Despite notable advancements achieved in various fields of knowledge, the world continues to grow increasingly complex and unpredictable, presenting new obstacles and disruptive evolutions that render the prediction of risks progressively more challenging with each passing moment. Moreover, as the pace of progress accelerates, the interdependence between risks and their potential outcomes grows ever stronger. A single new development or change has the potential to create new sources of risk, as it engenders a complex and multifaceted network of interconnectedness that becomes increasingly intricate with each passing moment. This article aims to draw a global picture of some major future risks from the perspective of business continuity while summarizing some past events, emphasizing the importance of Business Continuity Management, and supporting its main principles. There will be some predicted major global risks with global references and statistics in order to provide knowledge coming through the collective intelligence of the world. On the other hand, as it is highlighted in the last section, unfortunately, humankind has not been good at predicting emerging global events. That’s why it is seen that resiliency corresponding to the crisis must be strengthened.

   4. Chapter 15. Cryptocurrencies and Smart Contracts in Risk Management

      Furkan Uysal, Sevilay Demirkesen, Algan Tezel, Zafer Öztürk

      Abstract

      Being a distributed ledger, blockchain is considered a disruptive technology which premises new solutions to existing business practices. High level of trust, data security, immutability, and traceability are the main properties of a blockchain and it has wide application potential which is attracting researchers’ and practitioners’ attention recently. Despite its popularity and potential, a limited amount of research is devoted to blockchain and smart contract potential in risk management domain. Risk management is an indispensable part of today’s challenging business environment and requires innovative solution to existing practices. Therefore, the primary aim of this chapter is to investigate potential application areas of blockchain and smart contracts in risk management domain. Project risk management, financial risk management, enterprise risk management, and supply-chain risk management areas are examined in detail and many potential application points have been determined and reported. The findings of this chapter suggests that blockchain and smart contracts have high potential; however, detailed frameworks are needed to use blockchain as a disruptive technology in the risk management domain.

7. Backmatter