In our previous blog post, we discussed the numerous benefits of enterprise architecture (EA) for portfolio management. We concluded by mentioning that EA is effective in mitigating risks, primarily focusing on technological risks. In this follow-up article, we will explore the different types of risks that EA can help you identify, anticipate, and address in greater detail. Since we’ll also cover aspects like finance and compliance, this blog will be helpful for a wide range of executive roles.
1. Technological Risks
Like we mentioned in our previous blog, there are plenty of technological risks inherent to projects. These include (but are not limited to) hardware failure, software bugs, and interoperability issues. Besides these general risks, aspects like dependencies, end-of-life concerns, and (cyber)security vulnerabilities pose additional threats to large-scale architectures.
Luckily, enterprise architecture can help you anticipate or even outright prevent some of these problems. With an overview of your organisation’s architecture, you can effectively spot any potential problems. For example, EA can help you identify legacy components and use flags to highlight deprecated elements. When you do so, make sure to map your organisation’s entire architecture. We’ve seen cases where only a part of the architecture had been mapped to integrate a new application, leading to unexpected dependency issues down the road.
We’d also like to point out that this analysis should not be a one-and-done effort. In today’s volatile, uncertain, complex, and ambiguous (VUCA) world, regular updates are crucial to keeping up with the constantly changing landscape. It is often only during critical events like mergers that organisations realise the importance of having a comprehensive overview. At this point, the additional effort required within a short time will lead to a significantly larger investment, and perhaps even a less accurate assessment.
2. Operational Risks
Operational risks arise from day-to-day operations, and encompass challenges such as process failures, human errors, and supply chain disruptions. Establishing connections between systems is key to adequately responding to these kinds of issues. However, knowing which connections to create, strengthen or sever requires the same clear overview that we’ve mentioned above. By mapping these connections, EA enables effective communication and decision-making.
The consequences of an inadequately mapped system should not be underestimated. For example, imagine an e-commerce webshop that relies heavily on continuous core business operations. If a certain system experiences downtime and makes it impossible to continue certain critical business capabilities, having a backup plan or contingency strategy becomes crucial. This is no longer a far-off possibility: in an increasingly uncertain (digital) world, you need to be prepared for unforeseen circumstances.
3. Financial Risks
Besides the consequences of not being able to operate, which we illustrated with the example of the webshop above, there are also financial risks, especially those associated with project funding. These include cost overruns, budget constraints, and changes to the economic environment. Luckily, EA’s comprehensive overview will help you evaluate a project’s complexity and its susceptibility to change by examining dependencies and assessing the impact on critical business components.
For example, we’ve seen many cases where legacy systems lack proper documentation. Since you and your organisation may be unaware of the exact functionality of these systems, you will also have a hard time determining the potential consequences of replacing them.
4. Compliance Risks
Compliance risks revolve around an organisation’s adherence to legal and regulatory requirements. This includes data privacy laws, environmental regulations, and industry standards. EA’s strength lies in tracking the flow of information between systems, ensuring compliance with privacy laws such as GDPR. For example, EA can track where sensitive personal information is kept, or prevent certain data from being stored in US data centres due to legal implications like the Patriot Act.
Additionally, upcoming environmental regulations like the EU’s Corporate Sustainability Reporting Directive (CSRD) require organisations to align their practices accordingly. There may also be additional industry-specific compliance requirements, such as data-related regulations for pharmaceutical companies. Without understanding the flow of information, it will be difficult if not downright impossible to comply to these regulations.
5. Strategic Risks
Strategic risks occur when aligning projects with your organisation’s strategic objectives, considering changes in the competitive landscape, shifts in customer preferences, and emerging technologies. As we discussed in our previous blog, portfolio managers select projects based on strategic goals, ranging from safe bets that enhance the core business to innovative ventures that disrupt the market.
However, these strategic goals are subject to change. Staying on top of things means that your architecture should remain at least somewhat flexible. With an architecture that is not entirely set in stone, you’ll be prepared for adapting to mergers, changes to the competitive landscape, and other external factors.
By identifying and assessing a variety of risks, enterprise architecture plays a vital role in helping all manner of IT executives make informed decisions about which projects they want to invest in, and which strategies for risk mitigation they should create or expand on. The comprehensive overview provided by EA lets you navigate uncertainties, align projects with your organisation’s strategic goals, and ensure smoother operations.