Digitalisation alone cannot mitigate risk in business
Digitalisation alone cannot mitigate risk in business
Although digitalisation is considered a top priority for CEOs and despite a surge in the adoption of digital technology and data to mitigate risk in business, the continued neglect of the human element could thwart digitalisation efforts.
This is according to findings from the latest Executive Operational Risk Management (ORM) Survey by global operations management consultancy, DuPont Sustainable Solutions (DSS).
The consultancy has taken a closer look at the mining sector and Marco Pagnini, Director of Mining for DSS, explains that there are clear benefits to digitalisation of processes within mining operations – especially when it comes to risk management.
"When it comes to risk management, approximately 60% of critical risk controls, for example, for fall of ground and human-machine interactions, are still implemented by people through manual processes. This risk can be significantly reduced through the proper application of digital technologies and data analytics," says Pagnini.
For example, according to DSS, digital solutions such as sensors, smart wearables, video analytics, artificial intelligence and VR/AR can be effective tools to mitigate risk if applied correctly.
But there is a disconnect, particularly in terms of the role of people in the digital equation.
The survey shows that where risk management is concerned, the majority of companies (92%) believe digital tools will bring value to their operations. However, only 52% have a clear, unified digital transformation strategy and a less than half (49%) are focused on developing the requisite skills and mindsets and behaviours of people to effectively adopt digital tools.
"There is a natural inclination to invest in the newest technological solution rather than do the hard work related to change management, resulting in an increasing incongruence between fast pace digital evolution and slow to change mindsets and behaviours," says Pagnini.
In the case of mining, most operations are still people-intensive processes and Pagnini believes this will still be the case for a number of years.
"Some of the main operational risks in mining are fall of ground, and man machine interactions. Digital and tech-solutions present an opportunity to make a step-change on managing of such operational risks. In fact, mining companies are now realising that keep adding checklists of manual controls doesn't necessarily result in sustainable risk reduction and elimination of fatalities and less serious injuries. Digital solutions and technologies can help today further separate the workers from the sources of hazards, capture leading signals before incidents happen and provide real-time information on critical controls effectiveness to help decision-making and short interval controls," he continues.
Pagnini emphasises that most – if not all – leading global mining companies are undergoing digital transformation with digital and tech progressively impacting all elements of the supply and value chain, from core operations processes such as mining, asset management, logistics, etc. to key support processes such as HR, finance, accounting and procurement.
"While there are transformational initiatives in place, the reality is that most of them are still in a piloting / exploratory mode with high chances for failures or challenges in scaling-up applications. This is typical of most innovation processes and I understand that this is extremely frustrating for leaders, especially those that have been used to low innovation environments," says Pagnini.
In having to keep up with the demands of digitalisation, mining groups are faced with additional worries including the availability of technical skill sets.
The skill gap is rapidly increasing and requires a multi-layered and multi-stakeholder approach to be addressed at industry and country levels, says Pagnini.
"There is no doubt that the fast paced and accelerated digitalisation is posing key challenges with regard to the skills and capabilities required in the increasingly digitised industry. The nature of tasks performed by some workers will change, and new roles that require new skills and capabilities will be created. Mining companies now start to compete with technology giants such as Google, Facebook and alike to attract key talents to fulfil new jobs that were not needed before. In addition, the aged experienced workforce will be resistant to change and will pose additional complexities to manage."
According to DSS and Pagnini technology can definitely help to further reduce key risks in mining operations. However technology should not be seen as the next panacea.
"The impact of technology is only good if it's built on strong foundations which need to be in place to drive and sustain risk reduction and business performance improvement ...having fit-for-purpose technical processes, effective governance and management mechanisms, right competencies and capabilities, and strong mindsets and behaviours," says Pagnini.
DSS asserts that if a large number of digital experiments do not reach their full potential or even fail, it is not because the complexity of getting various role-players on-board, but rather it is because companies tend to overlook the importance of having strong foundations in place – particularly effective processes and systems and right mindsets and behaviours across the organisation.
The company claims there is a belief or a hope that digital will help making a giant leap in addressing the risks and operational challenges even in such conditions. In addition, the business case for digital is often not that clear and companies struggle to justify moving from a pilot to a larger-scale adoption.
"Executives should seriously take the learnings from digital failures and really make sure that any large-scale digital transformation fully encompasses the key elements that are required to make change inevitable, successful and sustainable," Pagnini adds.