Many digital transformation leaders treat key risks as assumptions.

Assumptions are usually not explored to the same depth as risks, leading to important considerations slipping through the cracks. An example of a key risk that is often treated as an assumption is:

“It is assumed that budget will be available for the life of the program.”

Categorising this as an assumption will create the following scenarios:

1. There is nobody in your organisation that is accountable for ensuring that your transformation budget remains intact across the life of your program.
2. Budget issues, both on program and off program, will manifest as an issue before the transformation leadership team can mitigate them.
3. You are silently enabling a blame culture. Your transformation leader can claim that were clear on their assumption that budget would be available. The remainder of your leadership team can claim that they thought the transformation leader was accountable for their transformation budget.

Let’s look at why you should treat your transformation budget as a risk, not an assumption.

Your committed budget may be not as committed as it seems…

The world we live in is more uncertain than before.

The confluence of new technologies, global market factors, geopolitical changes and entry into a post-pandemic world means that change occurs faster than ever before. While you might establish your required digital transformation budget at conception, external events can influence future budget cycles rendering what you thought was committed as no longer available. For example, how would your organisation fund a costly recovery from a cybersecurity breach and how might this impact your digital transformation budget.

External factors, more of a risk than ever, can influence your digital transformation budget and are outside the control of your transformation team; it should no longer be noted as an assumption and should be managed as a risk.

Other external factors that may impact your ongoing digital transformation budget include:

• Regulatory changes – it is important to expand your thinking in terms of what future regulatory changes may include. In the water industry there is an ever-increasing focus on our customers and our natural environment. However, what regulatory changes are likely to arise with the introduction of new, emerging technologies, data protection and cybersecurity?
• Technology changes – emerging technologies may supersede current technologies (even during the lifespan of a digital transformation)
• Global economic factors – exchange rates, inflation rates and overall global market conditions may put pressure on supply chains that exist outside your digital transformation program (and within it)
• Skills availability – resources and skills scarcity, particularly related to roles that deal with navigating change within your organisation will increase operating costs. Remember not all change will relate to digital transformation and occur on program – your digital transformation leader cannot assume that there will be no budget impact on items they are unaware of.
• Political climate – with most water utilities in Australia owned by state governments, a change of political appetite or direction may see unforeseen budget changes arise.

Who manages the budget risk?

A digital transformation program creates considerable opportunities for water utilities.

The transformation team, composed of people across the organisation, need to be empowered to focus on transformation. Too often, transformation leaders are drawn into non-transformation activities that defend the program which creates a downward spiral for momentum, morale, and outcomes. The transformation leader should be empowered to manage the digital transformation program budget only.

A key risk should be raised on the transformation program outlining the nature and impact of committed budget remaining available.

This accountable transformation executive that owns this risk is your Chief Financial Officer or equivalent role. At each transformation program leadership meeting, a review of key risks is usually performed, and the CFO should provide comments on the status of this risk. The comment is not related to the health of the digital transformation budget itself (for example, are we on track with spending etc.), it is related to the availability of committed budget for the activity.

You are looking for one of two statements from the CFO:

1. “We do not anticipate any external factor that will negatively impact the committed budget for this program”, or.
2. “We have identified an external factor/s that may challenge our ability to fully fund future elements of the program”.

Obviously, both statements have different outcomes however, treating this scenario as a risk, assigning the right ownership, and tracking regularly should increase the overall health of your digital transformation program and protect your ability to transform.

I write about digital transformation weekly. My 📥DMs are always open for engaging conversations.