IT Investment Risk Framework and Software Frameworks

An IT Investment Risk Framework is a set of constraints that an organisation imposes on its development organisation to ensure that IT Investments are delivered in a way that manages the risk involved. It should create failure containers so that any failure does not propagate across the organisation like the failure at Knight Capital which caused the organisation to fail.

The boundaries imposed by the framework should be negotiable rather than fixed, otherwise the framework may fail catastrophically. (Hat tip to Dave Snowden’s Cynefin Framework.)

The Risk Framework should NOT specify how the IT Investment is made, simply the way that IT Investment risk is managed. The Risk Framework specifies a number of Commitments placed on the development organisation when they accept funding for an investment.

By comparison SAFE and LESS are frameworks that seek to optimise the delivery of value to the organisation. They provide a number of enabling constraints in the form of principles. The SAFE and LESS frameworks can both be deployed within a IT Investment Risk Management Framework providing they satisfy the its constraints. In effect, they are an Option that the development company may adopt.

In summary an IT Investment Risk Management Framework is a commitment placed on a development organisation whereas the SAFE and LESS frameworks are options available to the aid development.

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About theitriskmanager

A IT programme manager specialising in delivering trading and risk management systems in Investment Banks. I achieve this by focusing on risk rather than cost. A focus on costs can lead to increased costs. View all posts by theitriskmanager

9 responses to “IT Investment Risk Framework and Software Frameworks

  • KentMcDonald

    Hi Chris, thanks for sharing your perspective that I know is based on your experiences. I’m somewhat following what you’re talking about, but a more in depth example would help me grasp it even more. Do you have an example that you could share?

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  • julianeverett

    Hi Chris,

    Great post.

    As regards the following statement, I was wondering exactly what you meant by negotiable? “The boundaries imposed by the framework should be negotiable rather than fixed, otherwise the framework may fail catastrophically.”

    Do you mean that boundaries should be occasionally permeable or else impermeable but elastic? I strongly advocate the latter. I think a boundary that is occasionally permeable is really a filter rather than a boundary. If you use the former where you need the latter then things are likely to go badly wrong (e.g. zombie organisations in a free market economy which are deemed “too big to fail”).

    I would also argue that the need for elasticity is not to prevent the framework from failing catastrophically but to prevent the managed asset from failing catastrophically: the two factors which determine the impact of a failure will be the size of the failed entity and the velocity of the failure process. Elastic boundaries dampen the failure process, reducing vecolity, enabling control and thereby reducing impact.

    • theitriskmanager

      Hi Julian

      Thank you for brilliant questions, builds and corrections. Yes. I am referring to catastrophic failure of the managed assets and as a result, loss of confidence in the system which may lead to people ignoring it altogether.

      The obvious negotiation is that the managed asset currently has a lead time longer than the boundary. The managed asset can negotiate to be operating within the framework (even though it fails one of the boundary tests) if it can agree a future date when it will be within the boundary and can demonstrate progress towards that goal. in effect acknowledging and agreeing to a centred set of values, even though it does not meet the bounded set of value.

      We can all imagine scenarios where there are important special cases that do not operate within the boundary. For example, a hardware or software component that cannot operate within the boundary for structural reasons. In those cases, the framework needs to be flexible enough to be extended, or it should contain a mechanism to manage exceptions. If the framework does not allow negotiation on the boundaries, assets will be managed outside of it and control is lost which in effect is a failure of the framework.

      Even though we cannot imagine them, there are scenarios that we cannot imagine where we need to negotiate the boundary. The framework need to be flexible enough to manage them.

      In other words, the framework needs to be as Agile as the assets being managed.

      Thank you again.

      Chris

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