IT – what the shareholder needs to know
By Annarien Adams, Nolands Advisory Services South Africa
“Every success story is a tale of constant adaption, revision and change” a quote by Richard Branson. The technology world is changing at a rapid speed and the size of the organisation will not necessarily determine the success of the organisation but the speed at which it changes.
This is where the shareholder should see themselves as the voice of reason. The average shareholder who is typically not involved in the day-to-day operations of the company, relies on the company's employees, its executives and its board of directors to protect their investment. However, each one of these parties has its own interests, which may differ with those of the shareholder. More importantly, IT may inevitably not be part of the agenda due to the fact that many executives and board members are themselves uncomfortable with information technology (IT) and the IT revolution that an organisation will face today.
Depending on how involved the shareholder wants to be, a shareholder may want to consider understanding the IT nuances that the organisation faces, as IT consistently evolves across that organisation and defies boundaries. Essentially IT is no longer the work of a single department as IT innovation expands across all levels of an organisation. It is up to the shareholders to gain suffcient knowledge of information technology and how it impacts the organisation to ultimately hold management accountable for their actions and change management.
The annual shareholder meeting provides shareholders with the unique opportunity to directly ask questions of board members, management and external auditors. A few questions the shareholder should consider asking:
- Does the audit committee and board members truly understand complex information technology issues that the organisation is facing?
- If the organisation is greatly driven by information technology, not only from an operational perspective but also highly integrated from a customer experience perspective, did the auditor perform tests of controls? More specifically, did the auditor test and report on integrated IT controls that ultimately drive the business and statement of financial position?
- Have any information technology risks, significant deficiencies or material weaknesses been reported during the financial period and did any derive from the control tests performed by audit?
- Have the internal auditors adopted an IT controls audit approach and how are they contributing to an integrated IT controls landscape? In addition, it may be valuable to determine whether internal audit have implemented a continuous auditing approach for IT controls, a method used to perform auditing activities, such as control and risk assessments, on a more frequent basis.
- Are the board members and the executive team mindful that significant / resourceful information technology investments are required to maintain a competitive advantage?
- What is the short-, medium- and long-term technology plan, not just to invest from an operational perspective but mindfully applying the red ocean / blue ocean principles?
- Does the company have suffcient room for IT growth in the years to come?
- As the 4th industrial revolution is upon us, have all employees been trained to do their jobs in the most effcient way, especially as the role of IT continues to evolve into a more interdisciplinary field?
- Machines are becoming increasingly intelligent, so organisations need to educate employees working alongside these machines to remain agile. Senior management need to facilitate these processes by reskilling legacy processes and seeking out adaptable talent, including addressing skill gaps.
- Ultimately, IT bares extensive costs to a business and if costs are not managed through a rigorous process it may result in ‘slow financial leaks’.
- What are the challenges management face and how is the management team addressing them?
- Needless to say, that cost will always be a driver but all IT investments have to consider costs versus benefit and hold management accountable through a benefits realisation mechanism once the project is completed.
Seeking a great return on investment, the shareholder should take time to familiarise themselves with IT governance metrics provided and ascertain whether the metrics are feasible. As discussed in the November INSIDER issue, it is imperative to understand the ‘what is measured’ and the ultimate drivers of those results, as they can significantly impact business operations.
In a world driven by changing global markets, disruptive technologies, robots, mobiles and riddled by cybercrime, climatic variability, unstable financial and political systems and market volatility shareholders need to keep abreast of performance and measures that encourage directors, management and investors. Shareholders should keep their eye on the fundamentals namely, liquidity, innovation, productivity and opportunities, all of which will be IT dependent.
Annarien AdamsNolands Advisory Services, Cape Town, South Africa
T: +27 21 658 6600
Published: January 2019 l Photo: Gorodenkoff - stock.adobe.com