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IT and Corporate Governance - How Do They Overlap?
Risk and Management
2016-07-28
IT governance is one of the theories that rapidly developed to become a very significant subject in information technology industry. Nowadays, IT governance is on the schema of almost every company, thus high-level models are continually being generated. Along with other critical objectives, many companies implement it with the aim of achieving the synthesis among IT and business.
An efficient practice of information technology is now an accepted organizational imperative for all industries, across all divisions and geographical regions, and commercial effectiveness. In addition, information technology has a crucial role in regards to improvements of corporate governance practices.
IT governance is not only of interest to the IT activities or simply an IT concern. There is a rising recognition that in order to advance the control and management of IT functions, more management commitment is required. Good corporate governance means building business reliability and market assurance, which consecutively is indispensable for companies which requisite access to equity capital aimed at long term investment.
This access is mainly essential for increasing equilibrium and prospect oriented growth companies. At this point, the principles have a verified record as the international reference point and as a real instrument for application. Moreover, good corporate governance is important for the sound banking and financial systems. Financial system includes central bank, commercial banks, pension and mutual funds, security market as well as regulatory authorities.
Banks guide and transmit public savings to the corporate sector. Banks are more exposed to risk in accumulating non-performing loans, a loan either in default or close to being in default if they are not able to measure the feasibility of debtors or borrows entities. In emerging countries, an ongoing challenge of banking systems is banking capture by corporations. This capture usually happens with the government support, directing to the significance of another feature of governance, the bank governance. This poses serious threats to economies across the world as was clearly seen more than once.
To break this down, as OECD (2004) states: "Corporate governance involves a set of relationships between a company’s management, its board, shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined “.
In addition, decent corporate governance guarantees that the business environment is transparent and rational and that companies can be held responsible for their activities. It also helps regulators to monitor and reduce systemic risks in the business environment. By staying conform to corporate governance principles, managers and owners of companies can take advantage of and grow transparency by:
- Boosting capital and financial market access
- Increasing trust of investors and regulators
- Supporting to sustain in a progressively competitive industry
- Improving structure of internal control, consequently leading to better responsibility and profit margins
- Prospecting development
- Avoiding systemic failures and limiting the financial impact locally
Considering the facts that information technology is costly, persistent, and it assists businesses with new opportunities, we can say that good IT governance pays well. The essential activity is assuring that IT offers the best possible support for the business into distributing what it is there to distribute at the same time protecting what is meant to be protected. Consequently, it is about dealing with technology in a professional and practical approach.
The main difference among management and governance is that management plans, constructs, and observes all activities in order to accomplish enterprise objectives, which are set by the governance body. Whereas, governance makes sure the investors’ requirements, relevant regulations, needs, and decisions are assessed and prioritized to deliver value and sustained growth to the enterprise.
As stated previously, the critical goal of IT governance is reaching strategic position among IT and business to ensure that investments in IT will bring value for the business. This position debate is definitely not new. The objectives of the IT governance scheme were extensively communicated and clarified. In order to achieve IT corporate governance objectives, PECB has established structures and processes needed to demonstrate the competence to implement, maintain and manage an ongoing governance management according to ISO/IEC 38500.
The "Certified ISO/IEC 38500 Lead IT Corporate Governance Manager" credential is a professional certification for professionals that want to lead their organizations to implement a framework of IT Corporate Governance and be compliant with the ISO/IEC 38500 requirements.
Author:
Alba Keqa is a Portfolio Marketing Manager for Risk & Management at PECB. She is in charge of conducting market research while developing and providing information related to Risk and Management standards. If you have any questions, please do not hesitate to contact: marketing.rm@pecb.com.
Contributor:
Vishal Vyas is a Principle consultant, Speaker and coach for IT Governance at Vinsys IT Consultancy, Dubai. He advises large businesses and government organizations about various aspects of Implementing IT Governance using relevant frameworks and standards like ISO/IEC38500, COBIT, etc.
If you have any questions or queries, feel free connect at vishal@vinsys.com.
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