Elevating Your Value Chain Security with Blockchain and Smart Contract Infrastructures

Synopsis:

This short technology-oriented article suggests both a strategic, and progressive way, to transform back-office corporate security functions into a global cross-enterprise program initiative which spans a company’s entire value chain. The reader will be introduced to some of the strange-sounding acronyms which, collectively, contribute to blockchain business improvement capabilities.

We introduce the idea that business executives and management have an opportunity to rethink how the world-class business optimization methodology, i.e. Value Chain Management (VCM), can be a game-changer for corporate security. We can accomplish the feat of turning costly security overhead functions into revenue drivers by leveraging blockchain technologies along with Business Rule and Process Automation (BR/PM) capabilities. By folding corporate and value chain security needs into a single cross-enterprise program initiative, with VCM as a central business optimization theme, a company can drive cross-enterprise process improvement and security management enhancement, in parallel.

Article

Corporate security is thus an integral part of our global value chain, or yet, it should be. Corporate security spans the diverse areas of:

·        Employee, customer and partner security

·        Physical asset security

·        Process, transaction and information flow security

·        Digital information and digital asset security

Based on our knowledge of the importance of security… and the dramatic increase in the levels of malicious actors, malware attacks, and fraud, it is not too hard to figure out that we, as company leaders, have a mandate to pivot and revamp security program investments and initiatives in a way that has not been widely adopted, nor tackled, before.

In essence, we must assume that cybercrime and cyber warfare are “the new normal”. Given this realization, it is clear that enterprise-wide security must be strengthened both within the 4 walls of the enterprise as well as across the company’s global value chain.

The starting point for many of us, is getting educated on which blockchain technologies can help us to drive business value. Once we have a high-level understanding of some of the key concepts such as DeFi, DAO and Smart Contracts, then we can start to explore those Value Chain processes which are most at risk, or those which might be right for automation or present themselves as the “low-hanging fruit; i.e. processes which offer high levels of Return-On-Investment, once automated.

Blockchain technology was invented in the 1990’s. It spans a variety of topics such as Decentralized Finance (DeFi), Distributed Autonomous Organization (DAO), Smart Contracts and Micro / Crypto-currencies, etc. Please see the sidebar for descriptions.

When implemented properly, these new technology components have the power to…

1.) Securely manage value chain processes and transactions… and…

2.) Drive significant shareholder value, operationally and financially.

The challenge, however, is to assemble a team that understands the company’s technology architecture, specifically the aspects of rule and process automation. So that they can identify where blockchain functions can be added, or deployed.

In essence, management has the opportunity to recast Value Chain Management with major security objectives and process optimization objectives as the value drivers. This awakening may seem simplistic. But’s it’s clear from the projects and programs that we get involved with, that management is having a tough time melding process improvement with both security and blockchain enablers.

The answer lies at the very roots of Value Chain Management. This is where Business Rule and Process Management (BR/PM) technologies can play a major role. The rule and process automation components are depicted in the accompanying diagram.  

Your team needs to compare these aspects with what technologies you have in place, or need. Then, you will need to explore which additions and functions might be needed to say, deploy DeFi, DAO or Smart Contracts.

The point that we want to make clear is that you will want to assemble a team that understands the business rule and process automation requirements. They can assess the tools and training needed to ensure that blockchain business objectives and strategies are getting identified, defined and prioritized as a part of the firm’s Value Chain Management business plan.

Next, we need the technology architecture team to prioritize where Smart Contracts can be quickly leveraged and how each opportunity fares in terms of a Strategic Value Assessment (SVA).

Our technology architecture depiction illustrates how process and rule engines work together as an automated system. It does not show how blockchain functions fit in as there are too many possible iterations and the blockchain automation and security Use Case will be different for each opportunity.

Ultimately, the Value Chain Management business plan defines how blockchain technology will be positioned and leveraged as part of the business architecture and how Smart Contracts will be deployed in high risk / high return areas.

Sidebar of Blockchain Terms

Blockchain

A blockchain is a growing list of records, called blocks, that are linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). The timestamp proves that the transaction data existed when the block was published in order to get into its hash.

Crypto-currency / Micro-currency

Cryptocurrencies are one of many names for digital coin assets which are tracked and traced on a decentralized financial network using blockchain ledger functions. Microcurrencies refer to either local or community currencies.

DeFi

DeFi (or “decentralized finance”) is an umbrella term for financial services on public blockchains, primarily Ethereum. With DeFi, you can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more — but it’s faster and doesn’t require paperwork or a third party. As with crypto generally, DeFi is global, peer-to-peer (meaning directly between two people, not routed through a centralized system), pseudonymous, and open to all.

Smart Contract

A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious activity.

DAO

The DAO is an organization that was designed to be automated and decentralized. It acted as a form of venture capital fund, based on open-source code and without a typical management structure or board of directors. To be fully decentralized, the DAO was unaffiliated with any particular nation-state, though it made use of the Ethereum network. Why make an organization like the DAO? The developers of the DAO believed they could eliminate human error or manipulation of investor funds by placing decision-making power into the hands of an automated system and a crowdsourced process. Fueled by ether, the DAO was designed to allow investors to send money from anywhere in the world anonymously. The DAO would then provide those owners tokens, allowing them voting rights on possible projects. Despite initial issues with hacking, interest in the DAO concept continues to grow.

NFT

Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.

Phil Wilson

Biographical Sketch

Phil Wilson is the Founder and Global Managing Director of Spectrum Arts, LLC which is engaged in helping customers in the highly regulated industries of financial services, pharmaceutical, agriculture, manufacturing, CPG and wellness. Phil was one of three individuals to lead PricewaterhouseCoopers (PwC) Value Chain Practice for North America. He provides Design, Supply and Value Chain Management process and practice guidance. Phil is well known as an "enterprise architect" who has led major "business transformation" projects around the globe involving enterprise integration and Business Process Reengineering.

Phil’s firm, Spectrum Arts LLC offers automated systems guidance on IBM and iGrafx business rule and process automation solutions as well as Diligent.com Governance Risk Compliance (GRC) solutions. Phil also provides consulting and educational courses on Value Chain Management and how Blockchain, Smart Contracts, Defi, DAO set-up, regulated stablecoins, crypto currencies, altcoins and micro currencies can help enhance value chain security.