With roots dating back to the World War I, Brady Corporation manufactures and markets a comprehensive line of identity and protection products, including labels, signs, safety devices, and printing systems. The company operates in more than 26 countries and has 500,000 customers in construction, education, electronics, healthcare, manufacturing, telecommunications, and other industries.

When Frank M. Jaehnert became president and CEO of Brady in 2003, the company's half billion in annual sales had stalled, profits had declined, and employee turnover had increased. Jaehnert gladly stepped up to the plate and accepted the challenges before him. He immediately began a major restructuring effort focused on controlling costs and asking his leadership team to set higher goals for the company to achieve. Jaehnert's vision was for the company to become an international market leader in the maintenance, repair, and operations space. Within three years, the company achieved its growth targets by expanding global operations, acquiring companies that could broaden Brady's product line, and making on-going capital investments in technology. In 2007, Brady got named to Forbes' Platinum 400 List of American's Best Big Companies.

Brady closed out its 2008 fiscal year with more than $1.5 billion in revenues. Jaehnart says, "Our first quarterly results for the 2009 fiscal year had the highest sales and the highest profit in our corporate history."

Enterpriseleadership.org recently sat down with Jaehnart to talk about his strategy for creating shareholder value by investing in technology, empowering his staff to fuel organic growth, and taking belt-tightening steps whenever necessary.

EL. Can you describe some of your key capital technology investments?

FMJ. In 2004, when we were at $500 million in revenues, we invested about $30 million to move our enterprise resource planning system to the SAP platform. That was a huge investment. Today, about 70 percent of the company uses this platform. We have one system for the entire company. We recently made sizable investments in three cloud-based computing systems.  These systems include the following: Salesforce.com, a customer relationship management system; GetPaid, a framework for processing online payments; and Workday, a human resources management system.

EL. How did you go about making these investment decisions?  Did you follow a formal process?

FMJ. Improvements in our productivity and in our competitive environment drive the company's overall goal to keep getting better at what it does. As a result, we challenge all of our teams in all of the functional areas, such as finance, human resources, and technology, to look for ways to improve how they run their businesses or their functions. They seek out solutions from vendors that offer the best-in-class products. Before we make any type of an investment decision, we do financial calculations based on the Economic Value Added (EVA) metric or economic profit developed by Stern Stewart. We look for good returns on our investments.

EL. Can you be more specific about how you measure shareholder value creation?

FMJ. That's an interesting question. It doesn't matter if it's a technology investment, an acquisition, a new product development investment, or the purchase of manufacturing equipment. We run every investment through an EVA calculation.  For example, you determine your cost of capital and then it becomes a component of the cost of equity and the cost of debt. You might want to create 10 percent more profit than your cost of capital. If your cost of capital is $100 million, you want to make sure that your return is more than $100 million to cover your cost of capital.
 
The ultimate shareholder value creation is if the stock price goes up or the dividend amount goes up. In this economy, the share price could go down because of external influences. The company might still see an increase in EVA, but real shareholder value comes from the share price plus dividends.

EL. What was the executive governance process for the SAP investment?

FMJ. Before we moved to SAP, we had a third-party company managing our many legacy systems for ERP. Unfortunately, this company had its own share of problems and was up for sale. We knew we wouldn't get the support we needed. We had to move right away to another system. On the other hand, an ERP system implementation is a big deal. We spent much time trying to justify this capital investment.  For example, we looked at how much money this system could save us, what additional information it could give us, and what reductions in administrative costs and sales costs we could expect. We presented our proposal to the board of directors. We went back and forth answering questions the different board members had. Eventually, the board approved the proposal.

EL. Do you have an executive committee that looks at technology investments across the company as part of the governance process?

FMJ. We don't have one committee. We have different committees. The executive committee includes all of my direct reports. They have a say on every major decision. We have an engineering committee, a new product development committee, and a technology committee. We don't have a manufacturing committee. Each manufacturing site makes decisions about its routine machinery and equipment. If a manufacturing site needs to move to a more advanced technology, then the engineering committee works with the machine manufacturer to make the business case for developing the new manufacturing technology. The business case then goes before the executive committee. I look to my CFO's expertise to determine if this investment will benefit the company financially.

EL. What do you expect from your chief information officer (CIO)?

FMJ. I consider my CIO, who is one of my direct reports, to be a business leader. He'll also tell you he's one, too. In fact, I expect all of my direct reports to be entrepreneurs who have ideas that can benefit the business. Our priorities include helping the company to grow sales and profits and to create shareholder value. I'm not looking for a CIO to be just a technologist. My CIO knows how to apply his technological expertise to make the company grow and to become more successful. The same goes for my human resources person, and my CFO. For example, if my CIO might see an opportunity for us to save millions by having a call center in the Philippines, then he'd do his homework to make sure we could support it and we could integrate it seamlessly into the company. As a result, it all comes down to what each business leader can do to improve the company.

EL. How has the economic climate affected your business?

FMJ. At the same time we announced out best first quarterly results ever, we also announced   a 10 percent cut in the workforce going forward. We have a freeze on salaries. We perceive a long and a deep recession. It felt good to have the best quarter ever. On the other hand, it felt like we contradicted ourselves when, we at the same time, announced some cutbacks. Up until a few months ago, some of our businesses were working three shifts just to keep up with customer demand. We've started to see a decline in our work volume.

EL. Can you give examples of how you've leveraged technology to get closer to your customers?

FMJ. By providing more information about the customer, Salesforce.com, for example, will enable our sales people to be more responsive to customers’ needs. This system isn't a response to the recession. Rolling this system out in the middle of a recession will help us to save money by making our people more productive.

In many ways, we connect to our customers through our SAP system online. Sometimes we even provide software for our customers to run. For example, Grainger, one of our largest distributors, uses our software so customers can create signs. If you go to www.grainger.com and click on signs, you can design your own sign online. You can see how it looks. You can change color and letter size. You can pay for the sign by credit card. All of the information gets transmitted to us and we produce the sign.  That's one way how we work with a large customer. It isn't all about SAP.

EL. What is your business strategy and where role does technology play in it?

FMJ. Our business strategy is very simple. We want to be number one or number two in all of our businesses. We have to define which businesses we're in. The role of technology is to help us to get to wherever we need to head. For example, to keep our sales people better informed about customers, we decided to go with Salesforce.com and BlackBerries.

EL. Do you have a formal process to set your business strategy?

FMJ. We talk about strategy every month. I don't believe in having one big annual meeting to establish what we're doing for the next two years, and then going off an executing against this one plan.  Because things move so quickly, we constantly have to keep on top of our strategy. When I became CEO in 2003, we did a three-day strategy session. I announced that we'd have a strategy session the following month. The next month, I announced the same thing. That's how our monthly strategy session came about.

You can't go off to a three-day, off-site meeting somewhere in Florida and expect to come back with your business strategy. Albert Einstein didn't go off to an off-site meeting with the hope of inventing the theory of relativity. He refined what he developed over time. The same thought process should go into developing a company's a business strategy. At first, everyone had some angst about the monthly strategy meeting, but today we can't live without it.

EL. How does the monthly strategy meeting process help your team to make better decisions and to deal more effectively with the board of directors?

FMJ. The meetings consist mostly of my direct reports. On occasion, we'll invite people who can help us to make better decisions. For example, when we talked about the adjacent markets we'd like to pursue, we had two middle managers present their findings about these markets. These experts went out and investigated these markets for several months. They know more about this subject area than we'll ever know.

During a session, we might look at how we can improve a particular business. Can we take it in a different direction or in another geographical area? Has the marketplace or the customers changed? We might try to answer questions like those.

During a two-day strategy session we had with board in May 2008, we gave a presentation on what we plan to do for the next five years. Our monthly strategy sessions helped us to put everything together and to make sure we understood what questions the board might have. For example, if we were going to talk about a possible acquisition, we might prepare our respond to questions about debt level and leveraging.

EL. How has the belt tightening affected your direct reports? Are they working harder on how to create business impact?

FMJ. During the past five years, we've acquired more than 30 small companies. We've focused on how and what we could improve and took the appropriate action. We consolidated factories and sales forces to become more productive.  We cut back on discretionary spending for things such as seminars and travel. In some cases, we took out a management layer.  We now have a heightened sense of urgency, but it's not like we weren't doing anything before the downturn in the economy.  Our management team has much experience dealing with ups and down in the economy. We've just taken it to another level.

EL. What quality practices do you use the most?

FMJ. Some companies transform themselves into a Six Sigma or a Lean shop. They even wrap their culture around Six Sigma or Lean. In contrast, our culture has always and will always be dedicated to creating shareholder value. To this end, we use techniques such as Lean, Six Sigma, Kaizen, and Value Stream Mapping for how we can create this shareholder values.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.

While major automobile manufacturers might be chalking up significant losses this year, one auto finance company has learned how to operate a successful business in a volatile and risky niche. Drive Financial Services, one of the fastest growing automotive finance companies in the U.S., makes new car loans to sub-prime borrowers throughout the U.S.  The company has a current $6 billion portfolio of loans originated from more than 8,000 U.S. franchise auto dealers. In fact, Tom Dundon, Drive Financial Service's CEO, said the company is continuing to enroll new auto dealers.

Unlike some auto financial companies, Drive Financial Services has a strong financial backer. In 2006, Banco Santandar Central Hispano, one of the seventh largest-for-profit banks in the world, brought Drive Financial Services from the Bank of Scotland. Drive Financial Service is Santandar's first privately held North American venture. This company holds a minority interest in Sovereign Bank in the U.S.

What keeps Drive Financial Services successfully on the move? Dundon says that he bases his company's ability to stay profitable during economic downturns on three things: a significant investment in a solid technology infrastructure, a contrarian view of what competitors are doing, and a well-thought out set of business practices emphasizing profitability. Enterpriseleadership.org recently sat down with Dundon to learn more about these things. Here he what he had to say:

EL. What is your business model?

TD. Santandar, our parent, provides us with liquidity to make car loans to sub-prime borrowers throughout the U.S.   We originate the loans for dealerships, mostly franchise dealerships. We also originate auto loans direct to consumers via the Internet.  We do both direct and indirect leading of only car loans exclusively to sub-prime borrowers.

EL. Three years ago, your predecessor decided to hold back on company expansion while other competitors wanted to grow rapidly. How has that strategy paid off for Drive given the state of the economy today?

TD. The decision we made three years ago is characteristic of the way we run our business. Many of our competitors have used the availability of leverage and of liquidity to justify pricing loans and taking risks that aren’t sustainable in an economy that isn’t growing. When you’re in a boom economy, low-margins and lots of risks are easy. If you don't have the margins to handle the losses that come from change in the environment, then you’re going to loose money when the economy stops growing. We have always had very conservative growth plans to make sure that we have the proper margins to handle downturn. The economy has softened up in the past 18 months. Although our profits are slightly impaired, we’re still profitable because of our conservative nature when things are good.

EL. How do you gauge your revenues?

TD. We do it by dollar amount. . The average life of the loan is about two years. We wouldn't do a $1,000 car loan. Our minimum car loan is about $7,500 and our average is about $15,000. We’re going to do $3.5 billion in loans this year.  If were to do the same amount next year, we’d have a $7 billion portfolio.

EL. Where in the company do you assess marketing opportunities and threats in the marketplace?

TD. We have a risk management group that does data modeling or decision science. This process enables us to keep up what our competitors do. We determine what we’re going to do based on what we see in our numbers. We look at our margins for the risks we're taking. We also look at our closure rate for the number of applications we’ve received. That ratio kind of tells us if we’re under priced or over priced relative to the market. If we look at our margin and find out that it’s too high or too low, then between those factors, we decide what to do. We try not to worry about what everyone else does. Just because many of our competitors are doing similar things, doesn’t mean they’re all good things to do.  If you look at what the mortgage companies have done and what some of our competitors have done, they didn't have the margin to sustain their business and unless the economy was growing. We don’t have that problem.

EL. Is change a permanent part of your business?

TD. Yes! Over the years, we’ve seen cycles in the economic environment. If we try to ride the wave up, we’ll invariably crash on the way down. We try to do good things for the stability and profitability of our business. We’re willing to let other people grow their business by going for volume. We make sure that we keep our margins wide enough so we can deal with an economic downturn. We do the same volume in bad times as we do in good times. 

EL. What capital investments, including technology, have you made to enable the company to grow and to become profitable?

TD. We’ve done a couple of things. Good data capture is the most important thing for us.  We make sure that we capture all of our data so we can make educated decisions.  We’ve invested heavily in our infrastructure to make sure our ability to grow or to shrink was based on most of our transactions are incremental costs. We have a base system that has a fixed cost. We then built out our systems to handle incremental volume and to make sure we’re only paying for what we use so opposed to having a huge fixed cost.

EL. What types of data are you capturing?

TD. We receive applications from certain dealerships. We capture everything from where the application comes from to the customer data to the data on what kind of loan they want. Once we book the loan, then we capture how long it took from the time we received the application to when we booked it. We capture the standard type of data having to do with the loan, such as the type of vehicle, and type of payments. We also capture all of the peripheral data around the customer's credit, around the dealer's behavior, and around our internal behaviors as they relate to how we book the loans. We made a commitment years ago to store every piece of data.

Many companies get into trouble because they don't properly label their data warehouse. You have to properly label all of the data and then you have to keep it and use it. We’ve made this task a priority. Historically, companies have purged data to free up resources. We always felt that we should spend the money and store data. As data storage has gotten less expensive, it has become easier to store massive amounts of data. If you ever need, you’ll have it. And we do have that data.

EL. One of your innovations is a scorecard program that enables an auto dealer to know if a customer fits into one of your programs. What makes this scorecard unique?

TD. We use credit bureau data, other third-party data sources, and our own experience to figure out if a customer can fit into our program, and if we should give them a car loan and at what price or structure should we do the loan. The innovation we have done is the value we add to the process. We include some other data sources, and we tightly couple the deal structure and the underwriting to the credit. Many of our competitors will only focus on credit. We believe that credit and underwriting together will lead us to the best decisions.

EL. Can you link capital investments to new customers, new dealers, and new improved business processes?

TD. We ran our business without growing while we invested in our infrastructure several years ago. We don't get benefit from it anymore. We’ve built our systems in such a way that the incremental enhancements don't require much capital investment. We’ve shifted from mostly capital investments and a little bit of maintenance to mostly maintenance, and not needing a many of new systems.  As technology has matured, we’ve been able to integrate our new systems easily in our infrastructure. When we first started building our infrastructure, we found it difficult to integrate a mainframe with other technologies. We built our enterprise architecture so that we can isolate any system with a problem, and keep it from affecting other systems. No one system can bring down the entire enterprise system. 

EL. Do you leverage technology resources from our parent?

TD. We don't do much of that. Santandar has a global IT initiative for its offices around the world to leverage technology. We’re so specialized that we only do auto loans. The technology investments we made before Santandar bought us put us in good shape to run our business. Because Santardar is so large and has so many countries that need its technology help through the world, the company decided that our systems are efficient and scalable enough so that we don’t need the same level of technology as the other business units do. 

EL.Have you built other things into your systems that your competitors don’t have? 

TD. We’ve a strong culture of making sure we’re efficient and not wasting money on costs. Because we're efficient and can make good credit decisions, we don’t have to sacrifice our margins. Many of our competitors focus on volume rather than profitability. In contrast, we emphasize profitability first and then volume. What’s happening in the U.S. economy rather proves this view.  People chase deals and chase volumes because they have an incentive to gain market share and volume. We’ve never looked at it like that.  Every one of our loans has to make a risk adjusted return. The number of loans we’ll book, and the amount of volume we’ll do will result from hard we work and from how well sell our product. Price is a determining factor in what good or service people decide to buy. If someone wants to beat you on price, no matter how good your service is, you’re going to find it difficult to get the get same marketplace and volume as someone who competes solely on price. We’ll never compete solely on price.

EL. How are you dealing with setbacks in the auto industry?  

TD. In July 2007, we decided that because consumers were under so much stress with high unemployment, with liquidity becoming more difficult to maintain, and with credit card companies and mortgage lenders operating under tight margins, we decided to cut out volume and to raise our margins. We felt that anymore undue stress on consumers would have a pretty big ripple effect on consumer finance in general. We got very conservative last year, raised our margins and tightened our credit. Now as other companies took a too long to react to these things in the economy, they’re now faced with heavy losses. We’re still profitable. In fact, we’re very profitable. We more prepared than ever to take advantage of less liquidity and less competitors in the marketplace. We can generate profits to liquidity we need to continue to operate our business.

EL. Do you have a governance process for capital investment decisions?

TD. Santardar wants us to run our business and unless we are trying to do something that makes no sense, it would never be an issue for us. Above a certain level, we have to go to our parent; otherwise, we’re on our own to run our business.  Our board of director’s provides the check and balances for our  key decisions. There are certain governance limits where yes we’d to get certain approval from the board. We haven't run into that as a business problem for us.

Right now the systems that we have are as good as better than anything in the industry. They are very cost effective. We don't have a glaring need that we can see today. Our philosophy has always been if we need to spend the money to make ourselves better, we will.

EL. Why did Santandar acquire Drive?

TD. Santandar is one of the top 10 banks in the world. It focuses on retail and commercial banking. It doesn’t do investment banking. It has strong consumer ties through a group called Santander Consumer, which does auto loans in Spain, Germany, Italy, Portugal, the Nordics, Eastern Europe, and South American. It’s one, if not, the largest non-captive auto finance company in the world. Auto finance is a core business for Santandar. Drive was the best auto finance franchise available for this company to buy.
 
Elizabeth M. Ferrarini - She is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com

How do you get more value out of IT, if not your CIO? How can technology teams make the strategic value of IT real for executives? George Westerman, a research scientist at the Center for Information Systems Research at MIT's Sloan School of Management, says it mostly boils down to one key concept: business agility. However, reliable and sustainable agility depends on a set of essential IT capabilities, ranging from on-going delivery of basic IT services, to accountability for IT. In fact, his book, IT Risk, Turning Business Threats into Competitive Advantage (co-authored with Richard Hunter),Westerman provides some rigorous research-driven advice and tools for treating IT risk as business risk in order to achieving strategic advantage.

Enterpriseleadership.org recently sat down with Westerman to discuss the research findings in his book, and the ways CIO can manage risk to improve their business agility. Here's what he had to say:

EL: What types of agility does an organization need in order to respond to different types of change?

GW: In the book, we define agility as the ability to change with managed cost and speed. That doesn’t mean being infinitely responsive. You need to understand what types of agility you are most likely to need. Are you integrating new acquisitions or launching new products? Are you changing business processes or reacting to unexpected daily events? Some of my other research shows that the ability to change business processes is the most commonly needed type of agility. That’s not the sexy kind of agility to launch new products or enter new markets, but it does appear to be what many organizations need most.

A well-structured, well-managed foundation of IT assets that is only as complex as necessary can better enable IT agility. But even then, organizations can have a tough time managing different types of agility at the same time. And, although IT is essential to some forms of agility, it's not the only element. Agility also requires the right kinds of people, empowered and able to make decisions. And it also requires leadership to manage organizational changes.

The mix of organizational, leadership, and technological requirement varies for different types of agility. It’s also important to understand that, just as different parts of a company may need different types of systems and processes, they also may need different types of agility.

EL: What changes have you seen in IT to make companies more agile?

GW: Our research shows that agility for IT comes from a couple of elements. You need first to get to the point where you have a very solid, well defined, and a well understood platform of technologies, business processes, and knowledge. If the platform is very well structured and very well understood, then you know where you need to make each change, and you can do it. When you make a change, you make it in one place and in one way, as opposed to all over the place like firms must with legacy spaghetti. And you know the links to business process and organizational elements so you can help your colleagues change those too. The well-structured, well-managed IT foundation forms the basis for many types of agility you need to get done.

EL: Can elaborate on the qualities of a well-managed IT foundation?

GW: So, one of IT’s key jobs is to make this foundation happen. Some firms with very well-structured foundations, such as TD Banknorth that can acquire new banks very rapidly and can expand services in a straightforward way. That's a great way to start. But most firms don't have that well-structured foundation. They need to gradually transition from their existing complexity into a more rationally-defined foundation. Firms in this situation improve agility gradually by helping people understand that each new change they want to make has to be part of a larger goal. Each change has to help move your platform strategy forward as opposed to taking you away from it. Governance processes that help everyone understand how to move the foundation in the right direction can help you gradually improve agility from IT.

Building on a solid foundation, governance, relationships, and project delivery processes must be improved to increase agility. Governance processes cannot become so bogged down in bureaucracy that they restrict speed. But they also cannot be so loose that they allow the foundation to become more complex. Project delivery processes must include the necessary controls to manage risk, but also must be agile enough to respond rapidly to changes in the business. And relationships must be strong enough to not only think about the future but also to have the tough conversations.

EL: Before you can get to agility, you need to think of risk. How do you define risk?

GW: Most people, when asked about IT risk management, think only about avoiding the downside or negative consequences of IT. To these people, IT risk falls into two categories: business continuity and security. What happens if our systems go down? What happens if a hacker gets into our system and causes havoc, or if somebody sells confidential data about our customers or products? But there’s more to IT risk.

Risk management can have an upside. If you want to take a risk, you can gain a tremendous return on it. You have to be willing to manage the downside, but you shouldn’t avoid risks because they have a potential downside. Many innovators and investors think about risk this way. But people don't often think about that for IT. And they should.

Our research shows, although risk is part of every major IT decision, decision makers need to think about IT risk more broadly than they typically do. IT risk is not just technical risk. Today, technology underpins all of our processes. Many of our decisions can affect business risk. And, managing risk not only avoids loss of value, but can also increase value available from IT.

EL: Can you describe the four elements of IT risk mentioned in your book?

GW: Availability refers to how can you keep the processes running and what happens if we don't. Access determines if you can provide information to the right people and not to the wrong people. These two risks fall clearly into most peoples’ preconceptions about IT risk. But there are two more that are equally important, though less-often considered when thinking about IT risk.

Accuracy refers to whether the business is getting accurate, timely, and complete information, and the negative consequences if it doesn’t. In the wake of Sarbanes Oxley, managers are paying attention to accuracy of financial information. But accuracy risk goes well beyond financials. Accuracy can also be the single view of your supply chain, or your customer, or your global view of what the organization might need to make decisions. Some inaccuracies, such as inventory record inaccuracy, create insidious problems that often fly below the radar. Others, such as inaccurate information on prescriptions or medical tests, can be life-threatening.

The last element is agility. People rarely think of agility as being a risk for IT, except it is -- all of the time. But, when people are resigned to delays and inflexibility from IT, they don’t always think of these issues as something they can manage; an option they can trade off against other options.

EL: Can you give an example of a company that could move fast enough to carry out a strategic opportunity?

GW: We studied Textronix, a prime example of this. In the late 1990s, Tektronix couldn't divest a division because its systems were too intertwined. To do so, Textronix would've needed to give a copy of all of its systems to the buyer of that division. Textronix spent three years and many millions of dollars untangling its systems. The transformation not only enabled it to divest and acquire businesses more easily, but also improved its global management visibility and customer responsiveness.

Insidious agility and accuracy risks can slow down the way you act. You figure IT isn't going to get things done fast enough, or you can't count on IT to deliver. As a result, business executives build shadow systems or they find other ways around the core IT group. And that adds complexity that increases all four IT risks.

EL: Which of the four risks is most important?

GW: All are important. But at a given time, for a given firm, one is usually more important than the others. For example, some financial services firms are considered "national financial infrastructure critical", meaning that, if their processes fail, markets fail. Availability is a critical risk for them. But, once they have the right availability safeguards in place, they can focus on other risks.

We find that people often focus most on the most visible IT risks: availability and access, and don’t always focus on accuracy and agility. But, accuracy and agility often are the most damaging to the firm in terms of financial impact. It’s just that the impacts are not as apparent as they are, for example, in a major outage.

EL: You write that the CIO often gets stuck carrying the burden of IT risk.

GW: Much of the cause of IT risk in the organization does not stem from mismanagement. Of course, some firms just don’t manage their IT operations very well. That's a problem. But, much of IT risk occurs because of complexity. That often arises from IT continually trying to meet today’s business needs without being able to impose the kinds of standards and strategic viewpoint that can lead to the well-structured foundation we discussed earlier. You wind up with the kind of legacy spaghetti that many managers have experienced in their firms. Complexity makes it difficult to manage for availability. It's tough to grant and control access. It's difficult to get accurate information when you are linking all of these disparate systems. And it’s just not very agile.

Business folks tend to delegate IT risk to IT folks because it contains two very naughty words -- one is IT and the other is risk. Many business executives don’t feel comfortable discussing IT – they just don't feel they understand it enough to have conversations about it. And, of course, very few people enjoy talking about risk.

As a result, business executives delegate IT risk management to the CIO. But, the CIO is not equipped to manage all of the elements of IT risk. He or she can manage infrastructure-related risks – a big component of availability and access risks -- but cannot even do those alone. The CIO cannot make changes that affect business process without business involvement. And, without business involvement, CIOs cannot put the policies and decision frameworks in place to prevent risk from increasing in the future.

EL: Isn't it the CIO's job to know how to speak to the business units?

GW: They should be able to. And many good IT executives can – both at the CIO level and lower in the organization. But even they can improve their conversations by discussing risk systematically.

Many discussions and debates between IT and business are really about differing views of risk. What is the tradeoff between having something that is more bulletproof versus something that is more flexible? Do you want to make something so easy to access that we can’t secure it properly? Do we need to meet our big deadline at all costs, or can we delay the deadline so we can do things a little bit better?

We have found that non-IT executives are comfortable using these four A's to have conversations about risk. They've done been able to do this before. They can quantify the importance of how to get better availability and what it's worth to them. They can quantify the cost of missing a major strategic change and what they are willing to do on that. They know how to talk in these terms. Now they have conversations about what risk tolerance and what are tradeoffs on the four A's. They no longer hand off risk to the CIO. Talking in terms of the four A’s allows you to make the decisions you can make, and gives IT people the information they need to do what they’re best at.

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Elizabeth M. Ferrarini - She is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com