Significant Of The It Governance Research Papers Examples
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Over the years, the business environment had experienced various major financial scandal as a result of poor corporate governance. Consequently, this has raised concern over the importance of IT governance to counter the bottleneck facing the business world. The IT governance is importance because of the several reasons. (1) IT governance has a significant role to play in enhancing corporate governance in a business environment. (2) The business world is lacking accountability and is unable to reflect the responsibilities for the IT services. (4) There is a potential widening gap between what business think about the IT and how the IT department perceives the scope of the business. (5) There is a need to understand how the management can integrate the business strategy and the IT in order to meet the business requirement and forecast the anticipated future. (6) The managers also need to identify how the existing IT infrastructures can be utilized to identify and manage critical risks. In overall the management has identified need to apply effective management disciplines in the IT governance to improve the performance of the business. Therefore, the need for the sound IT governance is essential to not only large business but also small and medium businesses.
Information Technology (IT) governance is becoming a fundamental requirement in the business environment to enhance the IT performance and hence corporate governance and optimum values among others. The IT governance is the responsibility of the executive management and board of director. “It is an integral part of enterprise governance and consists of the leadership and organizational structure and processes that ensure that the organization’s IT sustains and extends the organization’s strategies and objectives” (Karim et al. n.d. p.3).Many organizations have embraced the use of IT infrastructure and IT application, but the strategy bear minimum outcomes. Therefore, the organist ions need effective governance on the IT so that they can be able to feel the real impact of competent IT functions. There are other concerns that are driving force towards the achievement of the IT management. For instance, the management is aware of the increasing related risks and cost effectiveness of IT implementation in all organizations. As a result, there is an emerging realization the IT functions requires more management commitment in able to enhance the control and management of IT activities. If this is achieved, businesses irrespective of their size are anticipated to enjoy many benefits that are related to the IT governance. The paper provides an insight of the significant of IT governance through comparison of IT governance characteristics across the different size enterprise.
Improving corporate governance
IT governance has a significant role to play in enhancing corporate governance in a business environment. Over the years, the business environment had experienced various major financial scandal as a result of poor corporate governance. Among the company which had suffered from this failure is the Enron Company based in the North America. The failure of the corporate governances was caused by hitches in processes, policies, customs, institutions and laws. Such bottlenecks in the corporate governance lead to increasing unemployment, a financial loss attributed to the shareholders’ wealth, and in some cases leads to bankruptcy. As a result, demand for the integrating information technology in all organization has escalated in order to help the organization improve corporate governance and support organizational goals. However, similar to corporate governance, a lack of effective IT governance has an adverse effect on the business environment. For instance according to Karim et al. (p.2) “IT-enabled business transformations have caused several disappointments for chief executives.” Therefore, effective IT governance is needed to enhance the corporate governance. This clearly shows how the IT governance is a paramount need to enhance business imperative.
In order to avoid failure of the corporate governance, a sound IT governance is put in place to enhance the role of decision-making in the organization. The IT architecture contains an incorporated set of technical choices that guide the organization to achieve business needs. The IT decision also affects how decisions are conducted at different levels of the government such as functional level, business unit or corporate level. With this structure, the senior manager can be able to hold accountable the managers in different level. In this case, the first step of the IT governance aims at determining who will be held accountable for every decision made in each level. The decision making in IT monarchy ranges from highly decentralized to highly centralized. Most of the company utilizes various IT decision making by applying various approaches to different decisions. For instance, in the Business monarchy, IT related decisions are made by the senior business executives including chief executive officers. However, where the IT governance is employed “those decisions are made by an individual IT executive or a group of IT executive” (Weill and Ross, 2005, p.27). According to Robinson (2007) “A decision-making model helps ensure that IT decisions are coherent and consistent with the corporate direction and aligned with the overall business strategies.” This is because the responsible people are held accountable for every decision they make, and hence takes responsibilities for improving architecture standards to improve corporate governance.
Legal global firms seek to implement the hybrid IT governance model “to achieve both the synergies emphasized in more centralized models and the autonomy allowed by more decentralized models” (Weill and Ross, 2005, p.27). By doing so, such companies are anticipated to leap benefits of the IT governance such as improving corporate governance among others. Companies such as Carlson, DuPont, ING DIRECT, Johnson & Johnson, and J.P. Morgan Chase have achieved this benefit by embracing the IT governance at different three levels. These business levels include a group of business or regional level, business unit, and the enterprise. A company such as J.P. Morgan Chase have emphasized on autonomy in order to foster innovation and identify every business requirements, ranging from investment banking to credit cards (Weill and Ross, 2005).
External and internal compliance
In all levels of the business, the IT governance is required to incorporate approaches that can help an organization meet the External and Internal legal and regulatory requirements. The world has face financial misdeed and subsequent scandals in not only small businesses but also high-profile organizations. As a result, this raised concern over the investor confidence and led to the emergence of new regulations including the Sarbanes-Oxley Act. This regulation focuses on promoting corporate governance through strategies that will enhance internal balance and check, and subsequently promote corporate accountability. Therefore, the IT governance plays a significant role complying with such regulation by developing a foundation that enhances internal control environment. Damianides claims (2005) “Given the significance of these directives, and the important role IT has in financial systems, many organizations have proactively enhanced design, documentation, and consistency of IT controls” (78). For instance, Dell Corporation has introduced the IT governance to foster security and compliance by satisfying requirements with the preventative controls and forensic controls. The Dell software helps the small and large organization to adhere to internal security policies, comply with the external regulations and undertake migration and consolidation. The software provides the organization with vital information that can help them minimize external and internal breaches. This is done by “determining who has access to what; detect security violations, such as identifying users with inappropriate access; and provide access on a need to Know basis” (Dell, 2014).
Enhancing strategic management
In the contemporary business world, the new era of competition has emerged requiring the participating businesses to be more turbulent, faster, and increasingly global through a digital platform. Therefore, the demand for cost-effective and efficient information technology management that can help organizations to be flexible, innovative and create values. This involves re-engineering IT to add the value of the products through upstream, managing IT investing, and downstream such as deploying IT applications and managing customer relation. For instance, in 1989, British Petroleum (BP) transformed its IT function to support its mission “become the best in class in its support of BP’s goal to be the best upstream company in the world” (Peterson, 2004, p.55). After few years, the IT function was seen as ‘infrastructural planner’ that enhanced value creation and technical integrity through information sharing. The IT governance was able to provide an insight of the global strategies through the IT infrastructure planning.
In the modern days, IT has taken a new and advanced transformational route. The organization IT governance is enhancing the transformation of the core-peripheral organization design that incorporates corporate IT management (Patel, 2004). However, the local business applications are managed by the IT management or by businesses.in the organizational structure “the IT infrastructure decisions are centralized and allocated to the Corporate Unit.” On the other hand, the IT application decisions are decentralized and allocated to the different operational business units at the organization ‘peripheral” (Peterson, 2004, p.55). As a result, this decisions helps the organizations to focus on the strategic needs of the business and corporation with the external environment. Therefore, this illustrates how the IT governance helps the complying organizations to embrace the principles dynamic stability and strategic flexibility.
Different size of enterprises focuses entirely on the development of governance space by donating technology and tools solutions designed to increase the performance and productivity of the business. Small and Medium-sized Enterprises (SME) are known to be constituent and vibrant representation of the economic engine. Therefore, the enterprises have significant potential to drive employment and economic growth since contributing to poverty alleviation. The IT governance affects business performance, and ideally aids in outperforming business competitors (Milne, & Bowles, 2009). The paper will extend this a bit further to emphasize that IT governance outlines business performance when complied with business’s strategic objectives. Better IT governance leads directly to improved productivity, improved financial result, and high-quality products. Contrary, poor IT governance leads to bureaucracy, diminished overall financial performance, programmatic waste, and lower morale in the small and medium-sized enterprises (SME).
Relatively to large enterprises, small and medium-sized enterprises governance structure tends to be centralized and informal this is because they are constrained by financial limits in investing in IT. However, to underscore the significance of the IT governance practices, SME consider their production of good and services for their customers. One of the aspects of business performance is to be efficiency and coordination in the internal business processes to comprise end-to-end customer experience (Milne, & Bowles, 2009). For the positive effects of business, IT governance process must focus on visibility on the overall business process in which customers interact. In business enterprises, IT helps in increasing sight of the customers in favor of satisfying standards, regulations and policies. Finally, good IT governance addresses whole end-to-end business processes hence coordinating the activities of the enterprise over time and across organizational boundaries. IT governance improves performance management and hence improves process improvement, service level management, customer satisfaction and business value measurement (Milne, & Bowles, 2009).
IT governance improves productivity and performance in various ways. In small and large enterprises, web and desktop are tools that can be used to communicate and organize very easily. Business IT governance can be useful to multiple aspects of the processes within commercial and corporate organizations, with tangible outcomes in relations to performance. Customer reach has been made possible for different size of enterprises by information technology. Therefore, to reach customers calls for web services such as websites and email that are affordable even for small businesses (Milne, & Bowles, 2009). The key factor of the IT governance is to reach potential customers on a global scale. IT governance enhances communication in the organization to be effective, this minimizes cost as it maximizes efficiency. IT governance has improved the organizations within the small and large enterprises. For instance, development and project management systems can incorporate project and task process even in cases where the employees involved are located at remote locations (Milne, & Bowles, 2009).
IT governance has improved organization of SME and large business since it has incorporated database technology. In every organization, the database provides a central hub for the data that are associated with the business and preserves efficiency within the organization. Having shared internal resources makes a united system for teams of employees working under same roof toward same objectives. IT governance has made performance measurement achievable by different sizes of enterprises. SME are capable of acquiring IT governance, therefore, involving database and spreadsheet-powered systems. These allow the business to manipulate and store data which can be used in times of analysis and model system for future decision-making. Models become useful in the organizations since it helps the managers to create plans that increase the productivity of the business in the long-term. Having a precise analysis of the past performance of the business can be a critical step in making effective future plans of the enterprises.
Transparency and Accountability
The personality profile influence factors within the organization, since it defines the manner in which company characterized, its uniqueness and identity. Therefore, the organizations’ staffs should portray good personalities to represent the future image of the companies. IT governance encompasses the responsibilities and accountability which enhance desired behavior that support the organizations goals and objectives. Effective IT governance promotes a good internal environment that ensure a good culture and operating climate are conducive. Culture displays accountability in leadership that represented in the value statements. Good IT governance improves the transparency of the IT process, portfolio, and costs. These create cost effectiveness in enterprises hence increasing growth of the business. Responsibility, transparency and accountability are key essentials in decision-making. Allocation of the central framework to IT governance is the concept of improving accountability and authority.
An accountability framework guarantees accountability for, clarity of, and desired outcomes. Therefore, value statements should be well-defined with the clear obligation of roles and responsibilities. Decision authorities are individuals or bodies, for instance, boards, committees that are authorized to make and approve decisions regarding the use of IT. Additionally, the outline should include organizational concepts, structures and functional interrelationships. For the IT Government to be transparency, the communication between customers and workers has to be based on joint accountability for IT initiatives and improved. The information technology has become a critical business resource because its absence could result in poor decisions and ultimately business failure. Therefore, decision-making must be considered that ensure in IT decisions are consistent and coherent with the corporate direction and associated with the overall business strategies. The necessity for IT governance in business strategy alignment helps to understand and accept the management. A baseline set of progressions is well-defined, integrated and documented into strategic and operational planning. Similarly, measurement criteria are established, and activity is supervised hence having accountability in management.
IT risks are expressed in the business context to enable effective governance. Business risks are affected by the business environment such as management style, industry sector, culture, and risk appetite. Industry sector factors involve reputation and competition. For effective IT governance, the top manager must be able to distinguish IT risks. This ensures that the significant risks are eliminated or managed. The combination of impact base the significance of an IT risk, for instance, when the risk occurs, what are the effects would put on the organization. Since of the complexity and fast evolution nature of IT, awareness and education are important to ensure risks are identified. This will help not only top managers but all levels of the organization. There is a need for a dedicated risk management functions that will help in establishing ways to coup with risks. Additionally, external advice may be required on a regular basis to ensure risks are monitored. Preservation of a risk catalog and register can be useful in ensuring that a systematic review of all IT associated risks takes place on a periodic basis.
As expounded above, it is evident that the IT governance is an essential factor in the contemporary world where organizations strives to embrace the principles dynamic stability and strategic flexibility. Using either decentralized or centralized model the IT governance can solve the problems that are experience in the business world concerning the sound management in all levels of business. IT governance, improves the corporate governance in the business environment, enables company to have strategic management, External and internal compliance. It also enhances risk management, accountability and transparency, and overall performance improvement.
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