What impact will virtual reality have on risk management?

Virtual reality (VR) and augmented reality (AR) are technologies that always seem to be on the cusp of a major breakthrough, but mainstream acceptance has remained elusive outside of gaming and entertainment.

This may be about to change. Recent developments in the field and the surprise success of AR games like Pokémon GO have highlighted some of the opportunities available for these technologies across commercial and consumer environments.

But how will VR and AR affect risk management? Like many emerging technologies, they are double-edged swords for organisations. VR and AR could herald in a new era of risk management tools to help professionals identify, assess and resolve disruptive forces.

However, introducing these technologies into workplaces also creates new risks that corporate governance departments must overcome. We’re going to examine some of the positives and negatives of VR and AR for risk professionals, but let’s clear up some of the jargon first.

What are the differences between VR and AR?

VR and AR have both been staples of the science fiction genre for decades. Total Recall, Virtuosity and The Minority Report are just a few examples of movies that have used these technologies to drive the plot.

The key difference between the two technologies is that VR involves full immersion in a virtual environment. Typically, this requires a headset that filters out the real world and recreates entirely new landscapes.

AR, on the other hand, superimposes computer-generated images on the user’s real-world view. For example, Nintendo’s Pokémon GO utilised AR by overlaying digital Pokémon onto a smartphone’s camera view. This made Pokémon appear as if they were in the real world when using the camera.

Both VR and AR fall under the wider category of extended reality, or XR. Figures from Digi-Capital estimate the VR and AR markets will deliver up to $15 billion (£11.1 billion) and $90 billion of revenue, respectively, within the next five years. The UK currently has 463 VR/AR companies, with more than $645 million of venture capital funding invested in the technologies in London alone, according to PwC figures.

How could VR and AR improve risk management?

Currently, a number of organisations are trialling XR-related technologies for training and simulations. This is useful for potentially hazardous work environments where employees could be exposed to risk if performing certain exercises in real life.

But Steve Culp, senior managing director of Accenture’s Finance and Risk Services, believes VR and AR has much more to offer corporate governance professionals in the years to come.

Writing for Forbes, he describes a future where XR tools can help risk professionals become part of a fully immersive system for identifying problems in real-time.

“They could, for example, ‘walk’ or click through a 3D environment, which represents the results of augmented surveillance of employee emails, chats via instant messaging and calls,” he explained.

“Rather than having to dig through data in more traditional ways for possible violations, the [XR] environment assists in highlighting potential problems and showcases suspect relationships.”

A comprehensive XR ecosystem, when paired with developments in big data and artificial intelligence, could create information-rich virtual landscapes where professionals can interact with each other and the data in new and exciting ways.

Is a VR future close at hand for risk departments?

Mr Culp admits that most of the ideas he suggests exist only on paper, yet we’re already beginning to see how VR and AR could support risk identification.

Last month, PwC’s disruption consulting team unveiled a new VR tool that helps clients explore technology challenges to their business, including megadrones, synthetic biology, robotics and other innovations.

The experience allows participants to navigate a virtual city with 20 potential disruptions. Users must first identify the risks and then rate the impact on their business.

Jeremy Dalton, VR lead at PwC, said XR solutions have moved far beyond gaming applications in recent years.

“VR is a unique medium to tell the story of disruption, allowing our clients to experience the potential impact first-hand and bring their challenges to life in a much more immersive way,” he stated.

“It enables far more meaningful conversations about the risks faced by each organisation as a result.”

Tackling the risks that XR technologies pose

The future may look bright for XR, but organisations must also prepare for the potential downsides, the most pressing of which are safety and security risks.

Cyber security will likely become a major concern. Many VR and AR tools use sensor data, which could be hacked and manipulated, either for monetary gain or to hurt people. For example, compromising the output of an AR system could trick users into believing a computer-generated image is real, with fatal consequences.

On a more practical level, user distraction could cause accidents. You’ll no doubt have seen someone with their head down, oblivious to their surroundings because they are engrossed in their smartphones. Imagine this scenario with fully immersive 3D virtual environments and real-world overlays – the dangers are obvious.

What makes VR and AR risks even more problematic is that cyber security skills are already in short supply in the UK, which means the talent pool of candidates with XR technology experience is shallow.

A recent (ISC)2 report predicted there would be 1.8 million cyber security jobs unfilled across the globe by 2022. Will organisations have access to people with the appropriate skills to handle XR-related risks?

The bottom line

As VR and AR progress gains momentum, we expect a growing number of organisations to seek corporate governance professionals with a working knowledge of these and other cutting-edge technologies.

Truly immersive XR risk-based tools are likely some way off in the future, but businesses may want to ensure their departments are well versed on the opportunities and challenges that virtual environments could bring.

Emerging technologies can have a significant impact on risk management recruitment, so feel free to contact me on 0207 936 2601 or via email at ob@barclaysimpson.com to discuss your current and future needs.

Our Market Reports combine our review of the prevailing conditions in the risk management recruitment market with the results of our latest employer survey.

Image credit: fizkes via iStock