White-collar crime was recently reported to be costing the South African economy upwards of R40 billion a year. If this figure is anywhere near accurate, then it can be safely estimated that the cost of errors and omissions is at least R400 billion a year.
While we have no reliable way of verifying either estimate, what we do know is that the level of IT competence in many companies has dropped to dangerously low levels. Without sufficient IT skills, huge amounts of investors` money is likely to be squandered on IT acquisitions that add little value, enterprise systems that are too large and complex to control and outsourcing arrangements that are poorly managed. All too often this is to the detriment of the investors and other stakeholders.
With enterprise software solutions now reaching the R1 billion mark, a 10% overpricing or unnecessary effort is R100 million. The concern for investors is whether management teams are equipped to determine the correct price of a solution or reliable estimate of the human effort. Too often company executives find themselves having to trust advisors who themselves have a vested interest in the initiatives.
The situation is so serious that the King II commission made reference to the huge risks information technology presents to an enterprise`s success and the overly optimistic view of the value delivered to the stakeholders. White-collar crime has been made easier through the availability of poorly designed information systems without the necessary checks and balances to prevent fraud and detect error and omissions. The severity of this problem resulted in the Sarbanes-Oxley regulations that force company CEOs and CFOs to pay closer attention to the internal controls within their business processes.
The solution can be found in building better IT governance frameworks. Recent studies have indicated that there is a strong correlation between an enterprise`s financial performance and the quality of its IT governance. Investors may find IT governance is a useful predictor of an enterprise`s future performance.
The next IT Governance Forum is to be held on 6 and 7 June 2005 at the VW Conference Centre in Midrand.
Share
Editorial contacts