August 13, 2021
3 min.
Insights

IT Governance & Corporate Governance: why are they essential?

Which are the links between Corporate Governance and IT Governance? The COVID-19 crisis raises important concerns for Corporate Governance practices and standards. Is IT Governance useful to face this crisis?

How to define Corporate Governance?

Corporate Governance is an approach to govern a company in a way that will maximize the value creation in the best interest of all stakeholders. Corporate Governance takes into account the control, management and ownership of the company to make decisions for the Value Creation and Sharing.

It is crucial for companies, institutions, associations and other groups of persons, whether public or private, whatever the business model to understand what is the power relationships between their stakeholders.

Each of these entities can be seen as a boat with all the stakeholders on board sailing in direction of a destination where it will finally land. The stakeholders will find there their benefits, interests and profits to be shared among them. The boat here could be thought as a representation of the ‘company’, the destination as the’ vision’, the ability to choose the destination as the ‘corporate governance’ and all the activities performed inside the boat represent the’ business processes’ which support the business model.

Moreover on this boat, the benefits, profits and interests, in one word the created value, to share will be derived from the chosen destination and the sharing scheme will be based on the power relationships between the stakeholders.

What is IT Governance?

In a Nutshell, IT Governance aims at “governing” the Information Technologies in alignment with the strategic objectives set by the Board-level executives.

It ensures the IT Programs, Tracks, Investments and Landscapes do not contradict the overall strategy of the Company and are contributing to the achievements of concrete outcomes that drive value creation for ALL the stakeholders.  

To reach this objective, IT Governance addresses dimensions such as IT Budget Control and Approval, Portfolio and Project Management, Supplier & Vendor Management, Invoices Reconciliation, Contract & License Management and People Management.

How did IT Governance evolve?

Historically, IT and Business Directors have been in charge of taking IT-related decisions deferred by the Board. This often led to an attempt to maximize the short-term objectives of those deciders in contradiction with the Corporate Goals.

Nowadays, IT Governance is a prerogative of the IT Management which more and more has a voice in the Corporate Board to collaborate in the setting of the Corporate Strategy.

This translates in a tendency to avoid contradiction between short-term objectives and long-term ones. Typically, IT Governance is the prerogative of the company CIO who is actively involved. However, it can be deferred to other layers and/or other collaborators of the IT Department. In this latest case, a comprehensive and holistic reporting will be provided to the CIO who will benefit from supportive information to undertake his mission within the Board.

Is IT Governance an integral component of Corporate Governance?

Yes, it is!

CIOs tend to have a louder voice in Corporate Decision Committees when it comes to choosing the general orientation of the companies they belong to. Moreover, IT Governance provides a framework within the IT Organization of a Company to translate the Corporate Vision in Controlled IT Programs and Investments.

What are the Standard Frameworks for IT Governance?

COBIT and ITIL Frameworks are the most common. They can be used separately but also jointly since they are very complimentary.

What about tomorrow? Will IT Governance become the major strategy of… Corporate Governance?

Digital transformation is in the mouth of major leaders. IT transformation may become the main strategy of big companies and not only an enabler to translate the strategy.

In this background, we can think of ecosystems where Information Technologies will give the general orientation of industries and Corporate Governance will establish a proper IT Governance as its main strategy to survive to the fierce competition.