The COVID-19 pandemic and its impact on the business environment, has upended many business strategies and processes. As a result, organizations have had to think deep and fast on how to pivot to hybrid business models to survive. Digital transformation has been one of the areas that have received increasing focus and attention.
According to a July 2021 press release by Gartner, worldwide IT spending was projected to rise to USD 4.2 trillion in 2021. This amounts to an 8.6% increase from the 2020 spending. Most of the spending is on tools that support innovation, employee productivity and remote operations.
IT Governance Support in Organization Risk Management
Thanks to the growing pervasiveness of IT and the emerging enterprise risks, organizations must tweak their IT governance strategies to optimize their IT-related decisions at all levels (tactical, operational, and strategic). A well-oiled IT governance strategy can help you manage risk and create enterprise value. Here are some of the risk management areas an effective IT governance strategy can help with.
- Risk management support: IT governance helps to identify business risks and assess the level of risk your organization can allow. This also involves an assessment of the roles and responsibilities of IT employees.
- Risk impact analysis: Using specialized approaches, IT governance strategy can help organizations measure the impact of possible IT risks and their likelihood of occurring.
- Risk mitigation assessment: Having analyzed the possible risks and their likely impact on organizations, an IT governance strategy can help determine the appropriate risk mitigation measures to put in place. It also helps allocate accountable risk owners to the identified risks.
- Risk monitoring: A changing risk landscape means continuous threats over the life of the organization. For this reason, having an effective IT governance strategy can help monitor the performance of risk mitigation measures and take corrective action where need be.
IT Governance Strategy in Unlocking Value Creation
When your organization makes IT investments, the objective is to create business value which then extends to the stakeholders. However, this begs the question: is your organization reaping the maximum benefits out of its IT-enabled initiatives? Fewer organizations can confidently respond to this question. Thanks to IT governance strategies, organizations can access and utilize management instruments that help to realize IT-enabled value creation.
In most organizations, when reviewing IT investments, business managers often find themselves confronting the “IT black hole”. They feel that large sums are going into IT without there being a commensurate return coming out of it. This is where IT governance comes in to link the IT strategy to the business strategy to help answer value-related questions.
There are two main IT governance and strategy instruments-business case process and balanced scorecard- that can help demonstrate, measure, and manage IT-investment value in your organization.
Business Case Process
When organizations want to make IT investments, they usually develop a business case. This is a formal document that gives a structured overview of all the information relevant to the investment. It provides the justification and rationale of the investment to support decision making.
The IT governance strategy works through the business case process from case development to case maintenance to case review and finally case accommodation.
This ensures the business case is not just a document dumped in a shelf and gathering dust, but instead made to run parallel with the investment lifecycle. For instance, active business case maintenance monitors whether the IT investment is implemented in line with the business case. It looks at the objectives, cost, changes etc.
The business case review phase looks at the realization of the benefits of the investment and evaluates the costs and efforts consumed.
Therefore, the business case process as a governance instrument helps to create, sustain, and realize value from IT investments even in a shifting risk landscape.
The Balanced Scorecard
Not all value in your organization is tangible, some of it could be intangible today but translate into future tangible benefits. For instance, customer satisfaction, increased ability to innovate, and improved internal processes are values not objectively quantifiable in monetary terms. However, they play a key role in contributing to future financial performance and in ensuring the organization achieves its strategic goals.
Using the balanced scorecard as an instrument, IT governance can help organizations realize value by bringing together different business perspectives- user perspective, operation excellence perspective, business contribution perspective, and future orientation perspective.
Some of these perspectives are usually ignored when assessing IT investment value yet they are super important. For instance, there is a tendency to lean on the corporate contribution perspective because of the need to control IT expenses and pressure to justify the business value of new IT projects. However, there is more to a project than corporate contribution.
A balanced scorecard spotlights all value creation centers to enable your organization to make a wholesome assessment of IT investments and the business value they create.
IT Governance Strategy as a Performance Enabler
To survive and thrive in a niche, organizations must not only invest in people, technology, and processes but also monitor their performance. Using key IT metrics such as response time, maintenance costs, and application performance, IT governance frameworks can unlock performance in your organization.
IT governance strategy recognizes IT as an integral aspect in achieving organizational objectives. As part of performance management, the governance strategy looks at all IT service centers in your organization including the cost center, investment center, and profit center. This approach enables your organization to identify internal improvement opportunities, secure both financial and non-financial resources, as well as improve internal and external communication in your organization.
Conclusion
Organizations are increasingly facing an environment where the only constant element is change. This means more operational risks to existing business processes and exposure to newer technologies that organizations must invest in. Investment in IT can no longer be thought of as a back-office spend, but rather an integral performance and value enabler. However, to successfully align your IT strategy and business objectives, you must strengthen IT governance. It is the link that will give your organization a fighting chance even in the face of a changing risk landscape.
