Risks of Adopting Blockchain Technology
The blockchain industry is growing — no doubt — but its relatively young age means that there are not many precedents or case studies for organizations to refer and emulate. Furthermore, the success of optimally implementing the technology lies in factors that may not be controlled entirely by the organization. Lack of suitable talent is certainly one of those and even if you managed to assemble the best possible qualified team, it does not necessarily equate to success. This is mainly due to the newity of the industry and it requires your wider ecosystem to reciprocate data feed to have a more accurate result.
This brings us to our main topic — the risks of implementing blockchain technology today. For the purpose of this topic, kindly note the difference between risks and hurdles. Hurdles are what you must or should overcome before implementation. Risks are potential issues you might face after implementation.
Please note that Blockchain potential risks should not be confused with cons of adopting it. They are similar and could be interchanged. However, there is still some distinction between them
- Hurdles are what you know — they can be overcome before making the decision
- Risks are what you think might happen — it comes after a decision is made
- Cons are what you know will happen — can be mitigated but unavoidable
Potential Risks associated with Blockchain Adoption
In order for you to implement blockchain optimally, you need to identify the risks associated with it. This is to ensure that you are better equipped to solve issues that may arise in later stages. Understanding risks will help organizations choose the right blockchain strategy that is best suited to their own environment.
Entering the decision to implement blockchain should not be taken lightly. An organization should consider all angles of approach, do up a comprehensive feasibility study before making the decision. As blockchain is still considered new, the solutions it may offer might be beneficial for one particular company but not the other. This could lead to a potential risk of a good harmonious working relationship being disrupted to uncertainty and abrupt change. Other vendors or stakeholders might be caught out and disrupt an organization’s productivity — resulting in the chaos that could potentially be costly to resolve. Organizations should be well aware that this might be an issue
There is nothing wrong with implementing blockchain. However, organizations need to know that abrupt change causes inconvenience and humans are resistant to changes. These are just some of the stakeholders your brand is exposed to.
- Direct employees
- Direct customers
- Direct vendors
- Others wider stakeholders
- Media and the wider public
Although changes can or might be good, blockchain technology change might not lead to benefits if it is not implemented properly. You run the risk of alienating your organization’s brand standing in your ecosystem if the blockchain technology implemented causes more headaches than it can resolve.
Existing business framework
Your organization’s existing framework needs to be accounted for. During and after the implementation of blockchain technology, certain processes would be required to adapt, there might be redundancies in your framework, gaps that are required to be filled and aligned. The risk it poses might be costly if no recovery actions are planned. Confusions may arise, disturbance to still water will send ripples and distract your organization unnecessarily. You would need to ensure that steps are in place to bridge the transition.
Regulatory risks are something that cannot be avoided. You can hope that it never happens but always be prepared for it. Regulatory rules in your home country base will affect you directly. However, your stakeholders in the ecosystem you are encased in may be subjected to their own home country regulations. More often than not, organizations cannot control this, they can only hope it doesn’t affect them too much. The regulatory risk is something you must always be prepared for and make contingency plans.
Ecosystem integration issues
Successfully implementing blockchain technology in your organization is not sufficient. By implementing it now (at the time of writing — early 2021), you and your organization run the risk of being alienated. If blockchain technology smooths your own internal operation but isn’t able to sync well with other direct stakeholders (vendors, customers, service providers, etc), it might be a cause for concern. This is mainly due to the fact that not many organizations would adopt blockchain today.
This risk is subjective and may not apply universally across all industries. Depending on the industry you’re in, ecosystem integration issues usually affect industries that are intricately linked — like the aviation supply chain.
Another major but unlikely risk is the failure of blockchain service providers. Technology can too err and blockchain services are not immune to it. Although the chances are quite slim as services out there are of certain standards and the blockchain application would be built/modified by the organization directly. The majority of organizations that fail to see an improvement or experience some sort of “failure” are mainly due to their own strategic oversight or implemented in a non-optimal way.
This being said, failures do happen and certain failures could have catastrophic results. This risk is the reason why organizations have to do their own feasibility and due diligence.
Blockchain technology is new and carries loads of risks. However, you should not be turned off by just looking at the potential risks. You would also need to weigh the long-term benefits that blockchain will bring to the table. Risks are unavoidable and some benefits could override or make up for their shortcomings.
Read the next part when it comes out so that you may make a more well-informed decision.
In the next article
We will look at the benefits of adopting blockchain technology into your organization.
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