Emerging IT risks: insights from German banking

How do German banks manage the emerging risks stemming from IT innovations such as cyber risk? With a focus on process, roles and responsibilities, field data from ten banks participating in the 2014 ECB stress test were collected by interviewing IT managers, risk managers and external experts. Current procedures for handling emerging risks in German banks were identified from the interviews and analysed, guided by the extant literature. A clear gap was found between enterprise risk management (ERM) as a general approach to risks threatening firms’ objectives and ERM’s neglect of emerging risks, such as those associated with IT innovations. The findings suggest that ERM should be extended towards the collection and sharing of knowledge to allow for an initial understanding and description of emerging risks, as opposed to the traditional ERM approach involving estimates of impact and probability. For example, as cyber risks emerge from an IT innovation, the focus may need to switch towards reducing uncertainty through knowledge acquisition. Since individual managers seldom possess all relevant knowledge of an IT innovation, various stakeholders may need to be involved to exploit their expertise

Metodologia de Avaliação do Portfólio de Projetos de P&D pelo valor presente ajustado ao risco - um estudo de caso na Indústria Petroquímica.

Nowadays dedicated attention is devoted to intangible evaluation aspects, especially in intensive technological sectors, which are characterized by expressive R&D resources allocation and showing high uncertainties in the project development. The R&D projects can present diverse inovativeness degrees, each one with different projects development terms, technological intensities and complexities, and related uncertainties degrees. So, the current research and practices are concentrated in the adjustment of the traditional evaluation methodologies for the decision making process related to the portfolio management in those sectors, mainly in the pharmaceutical, biotechnology and chemical industries. In this way, the literature presents some uncertainties factors, like the project complexity, the life cycle stage of the technology, the existence of internal knowledge and competencies regarding the technology, the risks involved and the project development terms. The study is based in one in-depth literature review in the technology management, financial methodologies and decision making theoretical streams, and evolves for one field case study carried out in one big petrochemical Brazilian company, which allocates expressive amounts of investments in R&D and uses specific methodology for evaluating the portfolio of projects management. So, the study is organized in three sections: in the first, it aims to verify in the literature the existent methodologies for the project portfolio management. In the second, are presented the evaluation methodologies for innovation projects. Finally, in the third section, one empirical case study is performed in the Brazilian petrochemical leader, by using in-depth interviews and secondary data analyses, aiming to verify in the business practice the methodologies are being used for portfolio management and R&D evaluation, and its observed limitations. Conclusions search similarities in the evaluation methodologies applied to the project portfolio management context, trying to establish recommendations for the company under investigation. As main findings, it is concluded that the traditional evaluation methodologies do not fit very well when applied to R&D projects, which show high associated uncertainties, and need to be adjusted for use. This adjustment is made through specific uncertainty aspects - the risk drivers, which will influence the conditional probabilities of technical and market success, leading to one more robust aggregated indicator, the adjusted net present value. Beyond the use of this improved methodology, it seems to be worth value grouping the projects in different innovation categories, as preconized by the Strategic Buckets methodology, in order of comparing projects only pertaining for the same category, enabling so the adherence of the technology strategy to the business strategy. Muita atenção tem sido reservada à avaliação de intangíveis, em especial em setores de alto conteúdo tecnológico, e, por conseguinte de elevadas alocações em projetos de P&D, que por sua vez embutem alta incerteza. Os projetos de P&D apresentam diferentes graus de inovação, embutindo distintos prazos de maturação, conteúdo tecnológico e níveis de incerteza. Novas pesquisas e práticas têm se concentrado em adaptar as metodologias tradicionais de avaliação para a tomada de decisão em gestão de portfólio e seleção de projetos nestes setores, especialmente o farmacêutico, biotecnológico e químico. Nesse sentido, a literatura contempla vários fatores de incerteza, tais como a complexidade da inovação, o estágio no ciclo de vida da tecnologia, grau de competências e domínio interno da tecnologia, risco e prazo de maturação. Realiza-se um aprofundamento nos campos de gestão tecnológica, finanças e análise da decisão e compara-se a teoria com os achados da prática empresarial em uma empresa de grande porte no setor petroquímico, com elevada alocação em P&D e uso de metodologia específica de gestão do portfolio de projetos. Constata-se que as metodologias tradicionais de avaliação não respondem bem às elevadas incertezas dos projetos de inovação e necessitam ser ajustadas para uso, por meio de componentes de incerteza específicos - os direcionadores de risco, que afetam as probabilidades de sucesso técnico e comercial, e com isso se obtém um indicador mais robusto, o valor presente ajustado ao risco. Também parece prudente agrupar os projetos em diferentes categorias, selecionando os mais indicados segundo as métricas de avaliação de cada natureza, garantindo assim o alinhamento da estratégia tecnológica à corporativa