//
you're reading...
Information Security, IT & TECHNOLOGY

Will Blockchain Disrupt the Lives of Governance and Assurance Professionals?


 

Fernando NikitinThe blockchain’s distributed ledger paradigm is serving as the supporting foundation to some forms of digital transformation, including the utilization of cryptographic virtual currencies (VCs) such as Bitcoin. These virtual currencies are actively utilized around the globe, both within and outside the circuits of formal economies of countries, with important financial implications including increased economic disintermediation, financial inclusion and extended digital pseudo-ecosystems that combine people, business entities, and a new generation of smart connected components.

Not only is the whole fintech industry becoming substantially disrupted by the paradigm due to the ability to move money in a decentralized and secure peer-to-peer model, but virtually all other industries are prone to substitute often bureaucratic procedures for more automated and smarter business practices.

During recent years, global organizations including the United Nations system, Multilateral Development Banks (MDB), International Financial Institutions (IFI), and the World Economic Forum, were actively engaged in their respective roles trying to commensurate the impact of this paradigm in the societies and economies of the world.

The World Economic Forum, through its intellectual debate about the Fourth Industrial/Digital Revolution, as well as one of its Global Future Councils focused on the “Future of Blockchain,” has been vocal and active on the topic, stating that “blockchain is more than just moving money. It has the potential to transform our lives, and to make the world a more efficient, frictionless place. The number of people around the world living in either broken systems or entirely corrupt systems is staggering. If done right, blockchain could positively reform entire systems.”

In January 2016, the International Monetary Fund released a first-of-its kind professional paper called “Virtual Currencies and Beyond: Initial Considerations.” This so-called staff discussion note gave a serious consideration to how new technologies are driving transformational changes in the global economy, including the emerging utilization of virtual currencies created as private sector systems that, in many cases, facilitate peer-to-peer exchange, bypassing traditional central clearinghouses. The paper also notes that “VCs offer many potential benefits, including greater speed and efficiency in making payments and transfers—particularly across borders––and ultimately promoting financial inclusion. At the same time, VCs pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud.”

In a separate article, the IMF explores the topic of how “The Internet of Trust” is transforming the financial sector. Per its proponents, Bitcoin’s blockchain technology can be used to transform the financial sector fundamentally, for example by reducing the settlement time for securities transactions. With faster settlement, less money needs to be set aside to cover credit and settlement risks—just as collateral is not needed for a cash transaction.

The Inter-American Development Bank (IADB), the main regional development institution for Latin American and Caribbean countries, in March 2017 released the discussion paper “Digital Finance: New Times, New Challenges, New Opportunities,” explaining the financial implications of distributed ledger technologies applied in the region and around the World. The paper explains that “there is growing consensus in the financial services industry that distributed ledger technology (DLT), also known as blockchain, might just be the answer to the need of more efficient management of collateral [risks], resulting in more firms accessing credit, as well as … freeing up intermediaries’ capital for lending, and potential effects on SMEs’ direct and indirect access to multiple ways of credit.”

Now, coming back to the question of what implications and motivations this new paradigm may have in our professional life, I believe that a new generation of the IT governance, oversight and assurance professionals are called to play an elevated role in future ecosystems, economies and societies.

Similar to other emerging topics such as the advanced application of artificial intelligence (AI), big data, cloud computing, and Internet of Things (IoT), this must occur only by providing an unprecedented new level of verification and trust required by the stakeholders to sustain a paradigm that intends to be intrinsically resilient and secure by keeping distributed copies of the thematic ledger supported worldwide, using cryptographic proofs of data integrity and providing tamper-proof ledger entries.

Extraordinary challenges and opportunities are ahead for the millennials’ generation of assurance professionals, when called to provide both holistic and transactional assurance on increasingly complex digital ecosystems that involve people, processes, systems, as well as connected physical entities.

But the level of disruption to the assurance profession may not stop there. As another report, “Here’s Why Robots could be the Future of Finance” from the World Economic Forum pointed, the traditional tasks of human audit work are also highly subject to substitution by artificial intelligence interventions. Meanwhile, some audit tasks may be better assisted by this advanced application of technology. We, the auditors, will face the challenge of providing assurance to our stakeholders that these algorithms are effectively well designed, implemented, deployed and operating as expected.

In our profession, traditional auditing will remain necessary in many parts of the globe and in many traditional businesses environment for a while. However, and not less importantly, a new generation of millennial auditors will need to raise the bar by providing increasingly complex assurance services in more agile business environments and in support of upcoming digital transformations. A different professional audit mindset and additional expertise will be required to satisfy the expectations of stakeholders and business owners in this new world.

Fernando D. Nikitin, MBA, CIA, CRMA, CCSA, CISA, CGEIT, CISM, CRISC, CISSP, CBCP, TCNA, Principal Auditor, Inter-American Development Bank

[ISACA Now Blog]

About @PhilipHungCao

@PhilipHungCao, CISM, CCSP, CCSK, CASP, CIW-WSP, GICSP, PCNSE, ACSP, CCDA, DCSE, JNCIA, MCTS, MCSA, VCP5-DCV, VCP6-NV, ZCNT is a #TekF@rmer. He has 16 years' experience in ICT/Cybersecurity industry in various sectors & positions.

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Web Stats

  • 121,322 hits
@PhilipHungCao

@PhilipHungCao

@PhilipHungCao, CISM, CCSP, CCSK, CASP, CIW-WSP, GICSP, PCNSE, ACSP, CCDA, DCSE, JNCIA, MCTS, MCSA, VCP5-DCV, VCP6-NV, ZCNT is a #TekF@rmer. He has 16 years' experience in ICT/Cybersecurity industry in various sectors & positions.

Personal Links

View Full Profile →

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 2,358 other followers

Twitter Updates

Archives

August 2017
M T W T F S S
« Jul   Sep »
 123456
78910111213
14151617181920
21222324252627
28293031  
%d bloggers like this: