1. Chapter 4 Enterprise Systems
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WHAT WE WILL COVER
• Information Systems that Support Business Activities
• Enterprise Resource Planning
• Enterprise Risk Management
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3. INFORMATION SYSTEMS THAT SUPPORT BUSINESS ACTIVITIES
The value chain is a connected series of activities, each of which adds value or supports the addition of value to the firm’s goods or services.
There are five core components of a typical value chain.
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4. COMPONENTS OF A VALUE CHAIN
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
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5. VALUE CHAIN ACTIVITIES
Value chain components can be further classified into primary activities and secondary activities.
Primary activities create the most direct business value for the organization and its customers.
Secondary activities are conducted in support of or expansion of the business value that is created by the primary activities.
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6. CRITICAL SUPPORT ACTIVITIES
Firm infrastructure (which is often also called administration)
Technology development and R&D
Human resource (HR) management
Procurement
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7. INFORMATION SYSTEMS CLASSIFICATIONS
The common information systems classifications include:
Functional Information Systems
Workflow Management Systems
Transaction processing systems
Management Information and Document Management Systems
Supply Chain Management
Enterprise Resource Planning (ERP)
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8. ENTERPRISE RESOURCE PLANNING
There are primarily four ways that a business can derive benefit by applying IT to support the organization and its processes:
Supporting the value chain – As we have discussed in previous sections, systems, such as an ERP, can be applied directly to the value chain to make it more efficient and effective.
Automating – Business processes and functions can be automated, enabling cost reductions, normally through the consumption of less labour and increased efficiency and reliability.
Informing – IT systems create, store, and make available data that can be used to improve the quality of business decisions, as discussed in Chapter 3.
Gaining a competitive advantage – Implementing a new system that creates new capabilities may give an organization a temporary competitive advantage over their competitors.
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9. COMPARING IT STRATEGIC TACTICS
Scope
Benefits
Support of value chain
Organization-wide
• Views organization as a system with need for integration of components and activities
• Allows a focus on enabling value- adding activities
• Helps to fit IT applications and infrastructure to organization
Automating
Process/transaction
• Allows for cost reduction, efficiency, quality, and consistency
Informing
• Allows for knowledge and learning of core competencies
Competitive advantage
• Connects automating and informing of processes to organizational strategy
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THE ROLE OF IT GOVERNANCE AND LEADERSHIP IN CREATING SUSTAINABLE BUSINESS VALUE
Effective IT governance and leadership combine Porter’s competitive strategies with the value chain model to help create business value.
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EFFECTIVE IT GOVERNANCE AND LEADERSHIP WHEN COMBINED WITH PORTER’S VALUE CHAIN MODEL
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12. ENTERPRISE RISK MANAGEMENT (ERM)
All businesses face threats and risks. They cannot be eliminated completely, only anticipated and minimized.
These threats and risks can occur in real- time and impact current operations or be forecast as possible threats or risks against future operations.
A business must attempt to identify, address, and eliminate elements of risk before they threaten its success.
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ERM FRAMEWORK
Strategic—high-level goals, aligned with and supporting its mission
Operations—effective and efficient use of its resources
Reporting—reliability of reporting
Compliance—compliance with applicable laws and regulations
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COSO ERM FRAMEWORK
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15. ENTERPRISE RISK MATRIX
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16. RISK-REDUCTION METHODS
Risk Response
Action
Risk transfer
Move the risk to someone who is more able to deal with it.
Risk deferral
Postpone exposure to the risk until circumstances are more favourable or resources are available to address the risk.
Risk reduction
Either reduce the probability of the risk occurring or lessen the impact.
Risk acceptance
Realize that some risks are unavoidable and make sure that contingency plans are in place.
Risk avoidance
Eliminate the possibility of the risk occurring; however, that may close the doors on some business opportunities as well.
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17. DEFINING CONTROL AND CONTROLS
Businesses generally base control around three key concepts:
Control is a process that runs throughout the organization.
Control influences how people behave at work.
Control can only provide reasonable, not absolute, assurance of achieving objectives.
Controls are specific actions, including policies and procedures, designed to ensure the achievement of business objectives.
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18. THREE TYPES OF CONTROLS
Preventative
Detective
Corrective
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19. GENERIC CATEGORIES OF CONTROLS
Segregation of duties
Authorization
Security
ID codes
Verification
Control totals
Supervisory review
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RECAP
In what ways can organizations apply IT to build business value?
How can businesses strategically fit IT to the organization?
What is IT’s role in managing enterprise risk?
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