Risks in ContextBy Faisal Hoque | Posted 2009-05-05 Print
Risk management and IT continuity are complex and critical disciplines.
In an Interview with the BTM Institute, Toby Redshaw, the CIO of insurance giant, Aviva Group, explained that he reduces risk by seeing to it that activity at the project level is guided by the strategic needs of the enterprise:
“Before we go to the next program or the next phase, we take a very serious look at the business. Did this deliver the benefits we said it would? What is the benefit realization picture of this? We have to get better at that here. I've seen many IT shops where this is non-existent, but that's the game. We've here to do things for the business and to deliver certain business.
That sort of dialog and that sort of hard stare at ourselves will help us to become better and better at that. If technology’s real job is to have an impact on the profit and loss statement, then we need to have good discipline around portfolio demand management. Benefits realization is very important to us.
From a technology perspective, we look at both internal customer satisfaction and external customer satisfaction. One of the biggest gaps that technology has is the connection back to the profit and loss statement. We often ask our front-line IT leaders who work on key projects to tell me or the other divisional CIOs how that project relates back to the profit and loss statement. How does that project affect earnings per share? What is the linkage in what they're doing to the overall business value?”
Risks and threats emanating from strategy represent the dangers a firm faces when its management of business technology is poorly executed. Such systemic risks are manifest, for example, when business technology strategy is developed without the involvement of key business stakeholders, when project portfolios are constructed with a short-term orientation and with little or no consideration of strategic goals and priorities, and when sourcing decisions are made in a vacuum without sufficient understanding of the hazards of a lean in-house capability.
The net negative result of not managing strategy risks is twofold. One, the firm is unable to extract the maximum value from its technology assets and business technology capabilities; over time the ability of the firm to deploy business technology effectively declines. Two, there is a potential for business sub-optimization due to either insufficient or inappropriate investment in business technology management.
Although technology investments can be strategic and rational, very often they succumb to normal human tendencies. Many companies go from one extreme to the other. When things are good, the CIO promotes the idea of technology being a strategic enabler. When the business is in a downturn, the CIO is back to running technology as a cost center and trying to outsource as much as possible. Two years down the road, these organizations realize they've lost many capabilities and need to regroup.
In today’s economy, the days of reward outweighing risk are a thing of the past.
**The above article is adopted from the forthcoming BTM Research series, “Contours of Convergence.”
Faisal Hoque is an internationally known entrepreneur and author, and the founder and CEO of BTM Corporation (www.btmcorporation.com). His previous books include Sustained Innovation and Winning The 3-Legged Race. BTM innovates business models and enhances financial performance by converging business and technology with its products and intellectual property. © 2009 Faisal Hoque | firstname.lastname@example.org
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