The art of Risk Management involves identifying any possible future risks and then to apply suitable solutions that can remove or reduce them. In the past years, things such as human intelligence, trust, credibility, experts’ experience and economic-prophesy, etc. were a few elements that were used in the field of risk management. Yet factors such as inflation, tax, liquidity, trust, cybercrime, etc. have always been around that are difficult to control with a pre-conceived theory. In such a scenario, a mix of risk managers’ intelligence, foresight, and a platform that actually executes those principals would be a match made in heaven. We are fortunate that we are in the times when Blockchain technology is present. The blockchain technology can really help to risk management planning in some wonderful ways. In this article, we will explore how it can do so.
Cutting the chase- how blockchain can be beneficial?
The blockchain technology is a ledger-based technology which is governed by mathematical structure. Here are a few qualities of this ledger-based technology that can prove beneficial to the risk management industry:
- Assured Transparency: Given the blockchain technology is a ledger-based technology, so any transaction made between point A to point B is time-stamped, recorded forever on the ledger, and is open to anyone to view. This transparency can be a great boost to the market to do risk management.
- Almost instant settlements: Given the blockchain technology doesn’t involve any third parties; the settlements are always almost instant.
- Lower costs: The directness of transitions and settlements on the blockchain also decreases the costs effectively.
- Fraud combating power: The ledger technology records every single detail. This factor plays a key role in decreasing any fraudulent activity due to the transparent nature of the blockchain technology.
- Decentralized yet shared: The blockchain technology is decentralized and is in full access to all. The fact that the data can be cloned and synchronized amongst the market gives birth to resilience.
- Unlimited storage potential: Like the internet, blockchain technology is highly expandable and offers huge storage space. It is a good point in light of how the blockchain technology can help in storing the data by various markets in order to create a transparent market environment. This factor has made the blockchain technology to be a solution to those problems which never got fully solved before.
- Tamper-proof nature: The distributed ledger is tamper-proof. Yes, there have been cases were crypto exchanges faced hacking threats, but one must not fail to notice that these hacks were of private keys that related to various accounts. The distributed ledger in itself is tamper-proof. Therefore, with advancement, the security around private keys can also be raised and the entire system around the blockchain technology can also be made tamper-proof.
Coming to the tamper-proof nature of the blockchain technology, this can be highly beneficial to the risk managers planning strategies to safeguard their respective businesses and industries.
How can risk managers use the blockchain technology?
Risk managers are always on a look-out for a solution that can help them curb any potential danger or harming factor to their business. In this section of the article, we will look at how they can do so:
- Goodbye to the middlemen: As discussed above, the blockchain technology offers a lot of transparency, time-stamped records, public access, etc. All these factors lead to one major much-sorted quality- trust. Trust is what pulls the role of middlemen into the picture. As we can see, the blockchain technology can very well solve the trust factor, it, therefore, renders the role of middlemen as unnecessary.
- The Choice between permissioned and permission-less blockchains: Here, permissioned means permission required to access the ledger. And permission-less, on the other hand, would mean that which is open for anyone to access. Yes, the risk managers can choose the type of access to the blockchain ledger they want to offer to various sections of their institutions. This feature promises great security and control.
- Private Blockchain is under-construction: The blockchain industry is getting a lot of attention and its features are getting experimented with in full proportions. Many industries, such as banks, security, start-ups, and other companies, are investing hefty amounts to come up with private blockchain systems in order to fully incorporate the technology into their business. Once achieved, it will be a major achievement and will boost the risk management capabilities to greater levels.
The risk managers can greatly benefit from the blockchain technology in all the above ways and more interesting ways such as having a strong control on the up-to-date company’s activity on a regular basis, easy access to data sharing in the market any time of your choice, having a live access to the live market trends and learn from other mistakes, and so on. The blockchain technology has been proved beneficial in several industries such as education, health, IoT, food supplies, money transfers, etc. Risk managers can surely take cues from the proven records of the blockchain technology in other fields. The blockchain technology is only a decade old. Within such a short time-span, it has been gaining massive attention; it would be very interesting to watch what all it can offer in times to come.