ISO/IEC 38500 Corporate Governance

Introducing ISO/IEC 38500:
Corporate Governance in ICT
Christophe Feltus
Member of the ISO JTC1/SC7/WG1A on ICT Governance
Public Research Centre Henri Tudor,
29, Rue John F. Kennedy
L-1855 Luxembourg
christophe.feltus@tudor.lu

Outline
• ICT Governance definitions
• SG on ICT Governance
– itSMF involvement
– Interim Report
– Beyond ISO 38500
• Scope
• Application
• Objectives
• 6 principles
• Model for Corporate Governance of ICT
• Conclusions

Some definitions
• AS 8015 – Australian National Standards
Corporate Governance of ICT is the system by which the current and future use
of ICT is directed and controlled. It involves evaluating and directing the plans for
the use of ICT to support the organization and monitoring this use to achieve
plans. It includes the strategy and policies for using ICT within an organization.
(Corporate Governance of Information and Communication Technology; January
2005).

• OECD Corporate Governance
Corporate governance involves a set of relationships between a company’s
management, its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives of the
company are set, and the means of attaining those objectives and monitoring
performance are determined. Good corporate governance should provide proper
incentives for the board and management to pursue objectives that are in the
interests of the company and its shareholders and should facilitate effective
monitoring. (OECD Code on Corporate Governance)

Some definitions
• ITGI (IT Governance Institute)
IT Governance is the responsibility of the board of directors and executive
management. It is an integral part of enterprise governance and consists of the
leadership and organisational structures and processes that ensure that the
organisation’s IT sustains and extends the organisation’s strategies and
objectives. (Board Briefing, 2nd edition; 2003).

• World Bank Definition of Corporate Governance
Corporate governance refers to the structures and processes for the direction
and control of companies. Corporate governance concerns the relationships
among the management, the Board of Directors, the controlling shareholders
and other stakeholders. Good corporate governance contributes to sustainable
economic development by enhancing the performance of companies and
increasing their access to outside capital.

Some definitions
• MIT Sloan Center for Information Systems Research :
IT Governance is specifying the decision rights and accountability framework to
encourage desirable behaviour in the use of IT. (MIT CISR Working Paper No. 326;
April 2002).

• University of Tasmania
The survey of the literature by academics from the University of Tasmania
(Webb, Phyl, Pollard, Carol, and Ridley, Gail (2006), Attempting to Define IT
Governance: Wisdom or Folly?, Proceedings of the 39th Hawaii International
Conference on Systems Sciences) brings out the ‘elements’ that are common to a
range of suggested definitions. The elements are: strategic alignment, delivery
of business values, performance management, risk management, policies and
procedures, and control and accountability. Their resultant definition is : IT
Governance is the strategic alignment of IT with the business such that
maximum business value is achieved through the development and
maintenance of effective IT control and accountability, performance
management and risk management.

Outline
– itSMF involvment
– Interim Report
• Scope
• Application
• Objectives
• 6 principles
• Conclusions

Study Group in ISO
• JTC1 : Information Technology Standards
• JTC1 / SC7 : Software and System Engineering
• JTC1 / SC7 / WG25 : IT Operations (service management)
• Basically : Study Group in WG25
Study Group Chair : Alison Holt (New Zeland)
Co-Chair : Ed Lewis (Australia)
Members : Alwyn Smit, South Africa Yoshiyuki Hirano, Japan
Melanie Cheong, South Africa K.T. Hwang, Korea
Jyrki Lahnalahti, Finland Bill Powell, United States
Craig Pattison, itSMFI/New Zealand Dennis Ravenelle, itSMFI
Darcie Destito, United States Hella Shrader, United Kingdom
Gargi Keeni, India Mark Toomey, Australia
Sushil Chatterji, ISACA/ITGI Mikhail Pototsky, Russian Federation/itSMFI
Brian Cusack, New Zealand Max Shanahan, ISACA/ITGI
Christophe Feltus, Luxembourg Luis Rosa, Spain
Jenny Dugmore, UK.

Study Group in ISO
• In Seoul (2006) :
Reduce – if not remove – the confusion in the professional and the
academic literature about the topic
Resolutions :
- New SG
- 1st report
- Fast Track

• In Moscow (May 2007) :
 Preparation of 1st report
 Definition of ICT Governance
 What is ICT Governance ?

Study Group in ISO
• Montreal (November 2007)
Fast Track on Australian Standard on ICT Governance
– Accepted in July
– Resolution of comments on Fast Track : 149
– Canada : 2
– Spain : 1
– France : 5
– Italy : 10
– Japan : 10
– Korea : 1
– Luxembourg : 46
– New Zealand : 6
– UK : 4
– Sweden : 9
– USA : 15
– South Africa : 40

– 1st report
– NWI

Advisory Board Paper
The formal description it offers is:

“Governance is the collective set of procedures, policies, roles and
responsibilities, and organizational structures required to support an
effective decision-making process”.

Advisory Board Paper
Benefits of Governance : (Key words)

– Achieving business objectives by ensuring that each element of the mission and strategy are
assigned and managed with a clearly understood and transparent decisions rights and
accountability framework.

– Defining and encouraging desirable behavior in the use of IT and in the execution of IT
outsourcing arrangements.

– Implementing and integrating the desired business processes into the organization.

– Providing stability and overcoming the limitations of organizational structure.

– Improving customer, business and internal relationships and satisfaction, and reducing internal
territorial strife by formally integrating the customers, business units, and external IT providers
into a holistic IT governance framework.

– Enabling effective and strategically aligned decision making for the IT Principles that define the
role of IT, IT Architecture, IT Infrastructure, Application Portfolio and Frameworks, Service
Portfolio, Information and Competency Portfolios and IT Investment & Prioritization.

Interim Report
• A review of national governance activities
• The identification of a set of guiding principles for the development of an ICT
Governance standard to meet market requirements
• The identification of the ICT governance needs to be addressed in the standard
• An assessment of where ICT governance sits within JTC1
• A review of elements of ICT governance in existing SC7 standards
• Analysis to determine the level of standard required to sit above existing
frameworks and methodologies without replacing or displacing existing material.
Identification of the sort of “standard” required - TR, code of practice or guidelines
• Analysis of what would need to be added to AS 8015 to meet these needs
• Analysis of whether a maturity framework could be included from the outset
• Liaison Relationships: Contributions requested from existing bodies of knowledge
• Call to action dependent on AS 8015 fast tack result (which is now known)

Governance
around the world
Written and oral reports were presented to the ICT Study Group reviewing
the state of different ICT Standards environments within the different
jurisdictions.

A general movement towards compliance frameworks was reported in
terms of legislation, Standards adoption and control framework adoption
(eg. CobiT, ITIL, and so on).

Several reports noted that regulatory requirements were pending and that
there is considerable momentum gathering for comprehensive directives
(both explicit and implicit). The importance of ICT Governance and the
current opportune moment in time for ICT Governance advancement was
reported in each case.

What is ICT Governance ?
• The Working Group should establish a Glossary of governance terms. The Glossary
especially should include definitions that help to establish the difference between
Governance and Management. The definitions must be compatible with those in existing
ISO Standards

Director
Member of the most senior governing body of an organization. Includes owners, board
members, partners, senior executives or similar, and officers authorized by legislation or
regulation.

Management
Management is the process of controlling the activities required to achieve the strategic
objectives set by the organisation's governing body. Management is subject to the policy
guidance and monitoring set through corporate governance.

What is ICT Governance ?
• The objective of governance is to determine and cause the desired behavior and
results to achieve the strategic impact of IT.

– The system in which directors monitor, evaluate and direct IT management to ensure
effectiveness, accountability and compliance of IT

• The active distribution of decision-making rights and accountabilities among
different stakeholders in an organization and the rules and procedures for
making and monitoring those decisions to determine and achieve desired
behaviors and results .

– who makes directing, controlling and executing decisions
– how the decisions will be made
– what information is required to make the decisions
– what decision-making mechanisms should be required
– how exceptions will be handled
– how the governance results should be reviewed and improved

Scope
The objective of this Standard is to provide a framework of principles for Directors
to use when evaluating, directing and monitoring the use of information
technology (IT) in their organizations.

Scope
Governance is distinct from management, and for the avoidance of confusion, the two
concepts are clearly defined in the standard.

…the members of the governing body may also occupy the key roles in management.

It provides guidance to those advising, informing, or assisting directors. They include:
• Senior managers.
• Members of groups monitoring the resources within the organization.
• External business or technical specialists, such as legal or accounting
specialists, retail associations, or professional bodies.
• Vendors of hardware, software, communications and other IT products.
• Internal and external service providers (including consultants).
• IT auditors.

The standard is applicable for all organizations, from the smallest, to the largest, regardless of purpose,
design and ownership structure.

Outline

– Interim Report
• Beyond ISO 38500
• Scope
• Application
• Objectives
• 6 principles
• Conclusions

Application
This standard is applicable to all organizations, including public and private
companies, government entities, and not-for-profit organizations.

The standard is applicable to organizations of all sizes from the smallest to the
largest, regardless of the extent of their use of IT.

Outline

– Interim Report
• Scope
• Application
• Objectives
• 6 principles
• Conclusions

Objectives
The purpose of this Standard is to promote effective, efficient, and acceptable use of
IT in all organizations by:

• assuring stakeholders (including consumers, shareholders, and employees) that,
if the standard is followed, they can have confidence in the organization’s
corporate governance of IT;

• informing and guiding directors in governing the use of IT in their organization;
and

• providing a basis for objective evaluation of the corporate governance of IT.

6 principles
Principle 1: Establish clearly understood responsibilities for IT

Principle 2: Plan IT to best support the organization

Principle 3: Acquire IT validly

Principle 4: Ensure that IT performs well, whenever required

Principle 5: Ensure IT conforms with formal rules

Principle 6: Ensure IT use respects human factors

Model for Corporate Governance
of ICT

Directors should govern ICT through three main tasks:
(a) Evaluate the use of ICT.
(b) Direct preparation and implementation of plans and policies.
(c) Monitor conformance to policies, and performance against the plans.

Evaluate
• Directors should examine and make judgement on the current and future use of IT,
including strategies, proposals and supply arrangements (whether internal,
external, or both).

• In evaluating the use of IT, directors should consider the pressures acting upon the
business, such as technological change, economic and social trends, and political
influences.

• Directors should also take account of both current and future business needs —
the current and future organizational objectives that they must achieve, such as
maintaining competitive advantage, as well as the specific objectives of the
strategies and proposals they are evaluating.

Direct
• Directors should assign responsibility for, and direct preparation and
implementation of plans and policies. Plans should set the direction for
investments in IT projects and IT operations. Policies should establish sound
behaviour in the use of IT.

• Directors should ensure that the transition of projects to operational status is
properly planned and managed, taking into account impacts on business and
operational practices and existing IT systems and infrastructure.

• Directors should encourage a culture of good governance of IT in their organization
by requiring managers to provide timely information, to comply with direction and
to conform with the six principles of good governance.

Monitor
• To complete the cycle, directors should monitor, through appropriate
measurement systems, the performance of IT use. They should reassure
themselves that performance is in accordance with plans, particularly with regard
to business objectives.

• They should also make sure that the use of IT conforms with external obligations
(regulatory, legislation, common law, contractual) and internal work practices. If
necessary, directors should direct the submission of proposals for approval to
address identified needs.

Conclusions and Future Works
Review the use of the Plan, Do, Check Act (PDCA) lifecycle versus Evaluate, Direct Monitor
(EDM). Show mapping of EDM versus PDCA.
Incorporate human behavioural aspects to the chosen lifecycle.
Produce a diagram demonstrating the inter-relation of principles.
Develop derivative material to cover:
· Clarification on the risks of poor governance and decision making;
· Analysis on the benefits of Governance across the IT lifecycle; and
· The explanation of each principle.

Development of a TR2 for CIOs and executives to assist them in explaining the rationale
and implications (risks and benefits) of the principles.
Development of a TR2 for guidelines for the use of the standard by Public Sector
organizations

Conclusions and Future Works
Determine market requirements and then determine the coverage of future
standards for example IT Projects, IT Operations, IT Use or some other frameworks :
3 SGs
Digital Forensics,
Governance of IT operations,
Schedule of Products.
Schedule
3 NWIs
Guides for the Implementation of 38500
Standard for the Governance of Business Change involving IT investment
Standard for the Corporate Governance of business projects involving IT
investment

ISO/IEC 38500 Corporate Governance

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