Aligning information technology governance with corporate governance in a digitalizing world: The role of the board

Technology Governance and Corporate Governance: A Need for Alignment

Is technology's lack of representation in boardrooms a problem? This issue may stem from a disconnect between technology governance and corporate governance. Such a gap can weaken the board’s oversight of technology.

Better alignment is essential. The board and executive management share fiduciary responsibilities to shareholders. Technology plays a crucial role as a strategic lever for business success. Therefore, the board must enhance its oversight of technology.

The Challenge

Digital transformation is reshaping businesses dramatically. However, technology is often absent from board discussions. This absence reflects misalignment between IT governance and corporate governance.

Traditionally, boards consist mainly of business professionals like accountants and economists. Technical expertise is often limited to a few members with backgrounds in engineering or IT.

A survey of listed companies on the Ghana Stock Exchange revealed that:

- 41% have backgrounds in Accounting/Finance/Banking
- 26% are from Business/Economics/Management
- Only 9% have Information Technology backgrounds

Nearly 70% of board members come from business fields, while only 8% have tech expertise. In non-banking companies, this drops to just 5%. All surveyed banking companies included at least one member with tech experience due to regulatory requirements regarding cybersecurity.

Gartner predicts that by 2026, 70% of boards will include at least one tech expert. Forbes echoed this sentiment last year, emphasizing the need for boards to adapt to digital challenges.

IT Governance and Corporate Governance

How do IT governance and corporate governance relate? They are interconnected frameworks but serve different purposes. IT governance focuses on managing IT resources effectively within an organization.

Corporate governance oversees the entire organization’s ethical operations in stakeholders' best interests. While management handles daily activities, the board remains accountable to shareholders.

IT governance ensures that IT investments align with business objectives while managing risks effectively. Frameworks like COBIT and ITIL emphasize aligning IT with business strategy for effective management.

Both frameworks share common goals such as accountability and risk management, highlighting their interdependence.

Technology's Evolving Role in Business

Today, technology is integral to business operations. The internet revolutionized how businesses use information systems decades ago. Now, digital transformation solidifies this relationship further.

Businesses increasingly rely on technology for productivity and outcomes. The theme for the upcoming World Economic Forum emphasizes collaboration in our intelligent age.

Technology's High Risk

As businesses depend more on technology, risks also rise significantly. If core systems fail, many companies would struggle to operate normally despite backup plans.

Global IT spending continues to soar; Gartner estimates it will reach $5.61 trillion by 2025—a nearly 10% increase from 2024 levels. High-tech industries often spend up to 11% of revenue on technology compared to an average of 4%-7%.

Information security has become critical as organizations manage vast data assets digitally. Cybersecurity now governs information security risk management amid growing threats due to increased digitalization.

The Need for Alignment

Aligning IT governance with corporate governance is vital given today's fast-paced environment. Technology's strategic importance necessitates focused management attention.

The board must ensure that technological activities align with organizational goals while managing associated risks efficiently.

Responsibilities of the Board

The board has four key tasks requiring attention towards technology:

1. Setting Strategy: The board evaluates strategic options involving technology as an enabler.
2. Delegating Management: It maintains oversight through communication with executives about tech-related performance.
3. Accountability: The board balances short-term versus long-term interests concerning tech investments.
4. Risk Management: It ensures effective control over operational risks related to cybersecurity threats.

Bridging the Gap: The Role of the Board

To bridge this gap, boards should take four actions:

1. Acknowledge misalignment exists.
2. Build capacity around technological knowledge.
3. Establish oversight structures focusing on technology.
4. Elevate the importance of IT governance within corporate discussions.

Acknowledging alignment needs stems from recognizing stakeholder interests and resource efficiency during decision-making processes involving technology impacts on organizational goals.

Capacity building involves enhancing technical expertise among board members since underrepresentation weakens connections between tech and corporate governance efforts.

Creating sub-committees focused on technology can provide specialized knowledge necessary for effective oversight within corporate structures while raising stakes around effective IT governance practices across various domains such as strategy alignment and operational resilience.


Conclusion

Aligning corporate governance with IT governance is crucial today due to evolving technological demands impacting businesses significantly.The unique position held by boards makes it essential they prioritize these matters effectively while maintaining accountability towards stakeholders’ interests through informed decision-making processes surrounding technological investments aligned strategically toward achieving organizational objectives overall amidst rising complexities inherent within modern-day environments characterized by rapid advancements across sectors driven largely by innovation-led transformations facilitated primarily via digitization initiatives undertaken globally across industries alike today!