The Role of the Board of Directors in Information Technology

Today’s world is highly dependent on information technology. It is an essential part of our society in more ways than one. Big corporations are still not on their own considering how much they depend on it, and we could say there’s a bit of nervousness in the relationship between the two. The situation has been like this for two decades as the first time when two found themselves on the opposite sides was during the Y2K scare. Today, the IT risk remains strong as a board is still sensitive about IT due to government regulations, various pressures, server crashes, and hacker attacks. Board members are still not on the same page with it as we said, and they do not get too much into what makes its strategy and how the costs are created. This comes as an even greater surprise when we take into account how much every corporation spends on its informational sector. In some cases, it amounts to up to 50% of all spending. Some boards don’t even look to invest too much in this department, and instead use the footprints other companies left behind and rely on the already established order. In today’s world, this method is almost unacceptable as IT is more than capable to be in charge of companies’ strategies that mostly depend on the operational computer systems.

Source: freepik.com

When you think about it, it is not a surprise that matters have been like this for a while now. The reason is of course the lack of standards that would be put in place for It governance. Those who are in a board committee understand what needs to be done and what is allowed inside the areas that fall under corporate control. In the United States, most of it falls under the jurisdiction of Generally Accepted Accounting Principles. To some degree, the New York Stock Exchange and Securities and Exchange Commission are involved. They have various processes, regulations, and rules in place. The committee is put in place to monitor the situation for its employers and to make and explain the decision to shareholders. There’s always a place for novelties and improvements when it comes to IT but many boards do not work on them, despite the fact, there are already standards set.

When it comes to IT governance it doesn’t exist as such due to the lack of a similar body and usable knowledge about what’s best to do in this field. Board members, while usually excelling in some field, when it comes to IT they very often do not possess the necessary knowledge and intangibles to get to the core of the IT risk and how much does it cost. Sometimes, they do not even have a clue about competitive risks that are located everywhere in the comparative world. The CIOs, who are in charge of critical corporate information assets, are left on their own more often than not. This is the moment where we’ll state how critically ignorant is to leave matters like this by the board, who at times completely losses oversight over IT. Because of actions like this, or to put it even better; due to the lack of action firms could be put at grave risk.

Source: freepik.com

Luckily, this matter wasn’t neglected by all companies in the world. Instead, a group of companies decided to pull all the right moves. By actions of their own it governance committees was established. The first companies that have created IT committees on the board level were Mellon Financial, Novell, Home Depot, Procter & Gamble, Wal-Mart, and FedEx. There are of course a few more, but we decided to single out only the biggest names on the market. Thie IT committees have the same power and governing authority within a firm as compensation, audit, and governance committees. When things are organized this way and IT governance works in line with the CEO, CIOs, and rest of the management the technology decisions are driven the right way and all projects are controlled and expenses are kept under wraps which almost guarantees competitive advantage.

By now, you should understand that the board shouldn’t be thinking about why to get involved with IT decisions, it should be pondering on the matter of how. This is a big question that needs to be answered as there’s no unique solution. It is each firm for itself type of thing. The IT strategies evolved greatly over the last forty years, and they will continue to do so, and large companies need to adapt and overcome any change that comes their way. Each board needs to have a clear vision and a path carved upon how they’re going to approach the supervision of IT operations. The manner of how this matter is going to be approached is closely tied to the history of the company and issues such as the industry in which it operates, finances, and competitiveness among other things. You need to understand that the same rules can’t be applied for banks and air companies alike, or for retailers and sports societies. While it is great to have a board dedicate to IT, not all types of companies would have massive benefits from it. It is essential to learn straight away that smaller businesses such as bookshops, some retailers, or even smaller law firms have absolutely no need for it.

Source: freepik.com

Board members need to recognize that their firm fits the mold that requires special attention dedicated to IT, and only after that to have a more aggressive approach in resolving the issues that could arise in this department. Boards’ involvement in IT decisions is required only under special conditions that need to be recognized by the people in the upper echelons of any company’s management. It is something that needs to be developed from within the firm. We could not stress enough all the details that need to be covered when this issue is in the process of being resolved. If you are one of those who need more details, and there are more, worry not. The answers lie ahead, and if you are eager for more information regarding information technology and the board of directors click here on insights.diligent.com.

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