It’s hardly surprising that the call for technology-savvy directors is growing louder. There can be serious consequences if boards ignore or delegate enterprise-level technology governance. This is because boards are operating against a technology-saturated backdrop characterised by speed, complexity and ever-changing risk. They are expected to govern in an environment where the cloud, big data, mobile, social media and the internet of things are changing the way businesses operate and how modern societies work.
Should Technology be part of board oversight?
The role of the board in governing IT may be relatively new, but it looks as though it’s here to stay. And there are problems. More than 90 percent of boards identify technology as mission critical and the skill most likely to be under-represented or missing from boards. But less than 20 percent have the governance policies, structures and measures in place to know whether they are at risk. Clearly there is a gap between awareness and action.
Evidence that something’s awry can be found among high profile, expensive IT failures. If you read available inquiry reports about these cases, enterprise technology governance (ETG) is missing, the linkage between management and board oversight either non-existent or broken. Increased regulation and the introduction of voluntary standards over a 10+ year period are further indicators that all is not well in the boardroom when it comes to technology governance. The biggest risk in boards not stepping up to their roles in ETG relates to governing IT risk. Of course the obvious area of risk is cyber-security, but there is also infrastructure risk, competitive risk, information, business continuity, reputational and technology competency risk - all associated with technology. and its governance
With increased compliance and closer scrutiny, the necessity to govern technology investment and risk at the enterprise level has become a part of the board’s fiduciary duty of care, whether they realize it or not.
What is enterprise technology governance?
At the strategic level of the enterprise, ETG differs significantly from operational IT governance in the same way that strategic and operational management differ. ETG is about the board’s oversight of technology and information as strategic assets. At this level, the board focuses on how to best derive enterprise value and manage risk from the use of data and information via technology enabled systems. They use the strategic oversight of board governance to focus technology investment decisions and priorities, and use governance mechanisms and skilled questioning to hold management accountable.
Enterprise Technology Governancve has become an integral part of overall corporate governance. This has crept up on boards in the same way that technology has so rapidly and radically transformed business models, whole sectors and even economies.
Capability and competence within the board is the key
ETG capability requires both a level of technology maturity and the technology-related competence to analyse what is contained in board papers and proposals, and to question and to challenge appropriately. The bottom line is that a board’s combined knowledge, skills and experience drives their focus and priorities and underpins decision quality. A board’s capability and competence can have a profound impact on whether the organisation not only has a culture that uses data and information for decision making and competitive advantage. It also underpins whether the organisation realizes the value of technology investments, or whether technology-related matters even make it on to the board agenda.
Without a good percentage of digitally-savvy directors, boards risk ‘flying blind’. Financial, competitive, compliance and reputational risk are all at stake in a hands-off approach to ETG. Conversely with a strategy-matching and balanced set of competencies, boards are better equipped to meet their governance responsibilities.
ETG-focused boards can ask the right questions, challenge responses in relation to the businesses they govern and are much more likely to ensure that the right information makes it onto the board agenda.
In today’s technology saturated competitive environment ETG should be as integral to a board’s strategic orientation and priority skill-set, as finance and legal already are. But there’s a gap between awareness and either developing or recruiting technology savvy directors.
However it might not be as difficult to resolve as it appears. To be effective in oversight of an organisation’s use of IT, boards don’t necessarily need to understand the detail of technology as much as they need to understand how management should be dealing with technology.
Since boards are already well versed in oversight of management in respect of other resources, the learning curve may not as steep as some might imagine (Toomey, 2013).
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Toomey, M. (2013). LinkedIn Discussion thread 'Do boards know enough about technology to ask the right questions? : Boards and Advisors Group.
Valentine, E., & Stewart, G. (2013). The emerging role of the board of directors in enterprise business technology governance. International Journal of Disclosure and Governance (April), 1-17.
ABOUT THE AUTHOR: Elizabeth Valentine is a doctoral candidate at Queensland University of Technology. Her research and thesis focuses on, ‘Enterprise Technology Governance: a core competency for boards of directors in a digital world’.
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