How to manage the risk factors of Blockchain with innovations
Blockchain technology is an emerging technology developed in the last decade. In a narrow sense, a blockchain is a chained data structure in which data blocks are combined in a chronological order. It is a cryptographically guaranteed, untamperable and unforgeable distributed ledger.
The blockchain forms five technical features, such as distributed, trust-free, time stamp, asymmetric encryption and smart contract. It is an application technology that is more in line with the needs of the market economy and modern lifestyle. The application of blockchain technology can make complex economic life simple, but there are also risks. Therefore, we need to develop new risk management and control technologies and emergency measures for the new technology structure.
The research experience in the field of technological innovation tells us that only by eliminating obstacles in technology, blockchain revolution can be happen. If you don’t know how the blockchain will occupy the highlands, it is a mistake to start blockchain innovation.
Blockchain technology, also known as Distributed Accounting Technology (DLT), takes us into a new paradigm from “trusted people” to “trust machines” and “centralized” to “decentralized”. The blockchain confirms anonymous identities and transactions through decentralized, peer-verified, time-stamped books. Everyone can verify the account book, but it is not controlled by either party. Commercial activities based on blockchain technology have three characteristics: timelessness, autonomy and transparency.
These technical features can help companies mitigate business risks. Let’s talk about the blockchain to help mitigate the risks and how to mitigate them.
The framework extends it to the blockchain domain explain how to use blockchains to mitigate preventable, strategic and external risks. Preventable risk is an internal risk that is caused by daily operational process failures and employee turnover or inappropriate behavior, such as an employee of a bribery officer or a rogue trader. Strategic risks come from strategic investments by companies such as R&D projects and the credit and market risks of financial firms. These risks cannot be avoided in order to get a good return. Finally, external risks come from outside the company and are not controlled by the company. In the traditional sense it refers to natural, political or macroeconomic disasters.
Recently, the world has become more interconnected and dependent on the flow of information, and cyber risks have also been incorporated into external risks. Regardless of any industry, the disruption of external information flow and the destruction of internal information security are key risks that must be addressed.