There is no escaping the growing significance of shared ledger technology. Initially seen as a niche technology considered useful only for those looking to exchange bitcoins supported by blockchain, opinion has shifted in the past 12 months and it has been thrust into the mainstream.
Due to the way in which blockchain has developed as a decentralised means of facilitating more secure, faster and cheaper payments, financial services institutions have come to appreciate the scope of this technology for – among other areas – payments, trade finance and the confirmation and settlement of financial transactions.
It is evident that this technology has the potential to overhaul the infrastructure at the heart of business and government. In particular, it may change how governments distribute benefits; track what money is being spent on; maximise the efficiency and minimise the cost of energy consumption; and track and confirm the provenance of assets, for example diamonds.
On 9th March, the financial services practice at Odgers Berndtson gathered industry leaders together to discuss the impact of this technology on financial services, the energy sector and government. As highlighted by the discussions at our event, here are three ways in which businesses can prepare themselves to successfully adopt distributed ledger technology:
Ensure your executives understand shared ledger technology and how it will disrupt your business
For companies with a strong presence in the UK, this statement has particular significance. The UK government is recognised internationally for being at the forefront of thinking around FinTech and is actively encouraging and creating an environment to nurture companies that are involved in developing and implementing distributed ledger and many other technologies.
However, it could be four to five years before companies see a return on their investment. This makes it essential that all executive and non-executive board members recognise the benefits of developing this technology through their own innovation labs, direct investment in FinTech start-ups, or participating in consortia with peer organisations.
Importantly, even if executives and non-executives can’t grasp the technical detail behind the technology, they must have enough of an understanding to ask the right questions about the ‘business case’ at every stage of its adoption and management. For example, what are the security implications of taking on this technology? How will it deliver efficiencies?
Upskill your talent
Searches for ‘experts in distributed ledger technology’ as one of the main criteria are not yet commonplace. But it is only a matter of time.
At present are very few individuals globally who could advise an international company on how to adopt distributed ledger technology. Companies need to look at how to upskill their operational talent, not just executives. The number of experts in distributed ledger technology that leading companies need to hire simply do not currently exist and the market is opaque and dynamic. As a result, it is important to work with organisations that have the right networks to access appropriate talent.
Ensure your business has sufficient security policies in place
Security is one of the most commonly cited concerns associated with shared ledger technology. This has been driven by its association with cryptocurrencies, such as bitcoin, and the underlying blockchain technology supporting transactions.
Blockchain technology is widely predicted to become one of the most important technologies since the adoption of the world wide web
It is important to distinguish between the all-encompassing term shared ledger technology and public and private versions, otherwise known as un-permissioned and permissioned.
Blockchain was developed in a public, un-permissioned environment which supported the anonymity of participants. However, distributed ledger technology adopted by financial services firms and governments is more likely to be restricted to a private group of known participants. This is termed ‘permissioned’. Ultimately, there will probably be a number of distributed ledgers that co-exist and intersect.
Commentators, and indeed the panellists at our event, are divided as to the speed of adoption of shared ledger technology and the degree to which it can be secure. Nevertheless, it is widely predicted to become one of the most impactful technologies since the adoption of the world wide web.
This year the Chief Scientific Advisor to HM Government, Sir Mark Walport, published a report titled, ‘Distributed Ledger Technology: beyond blockchain’. The report begins with this striking statement:
“Algorithms that enable the creation of distributed ledgers are powerful, disruptive innovations that could transform the delivery of public and private services”
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