20 Pages Posted: 30 Jul 2012 Last revised: 10 Sep 2013
Date Written: July 30, 2012
The attached article describes an innovative approach to reducing, managing and insuring IT project risk. The article represents a rebuttal to Flyvbjerg’s and Budzier’s September 2011, Harvard Business Review Idea Watch article entitled, 'Why Your IT Project May Be Riskier Than You Think'.
The article shows how Flvyberg and Budzier err in categorizing runaway IT projects as 'black swans' and in proposing steps to accommodate, rather than attack, IT project risk. The article then challenges accepted wisdom, which focuses on operational risk management as the key to improving IT productivity. Instead, the article argues that by using underwriting to manage IT projects as a portfolio of risks, root causes of failure can be identified and reduced/eliminated, with excess risk transferred via insurance or reinsurance.
Given the massive waste and business opportunity costs arising from failed IT projects, even a minute percentage decrease in failed projects will dramatically improve IT productivity and business results.
Keywords: Flyvbjerg, Budzier, IT, portfolio, TBM, technology business management, operational risk management, Harvard Business Review, Black Swan, project risk, project failure, errors, omissions, insurance
JEL Classification: D81, G39, O3
Suggested Citation: Suggested Citation
Zafft, Robert, A White Elephant Is Not a Black Swan: Why You Can Do More About IT Project Risk than You Think - A Reply to Flyvbjerg and Budzier (July 30, 2012). Available at SSRN: https://ssrn.com/abstract=2119800 or http://dx.doi.org/10.2139/ssrn.2119800