1. Agent-Based Modeling using a reward system in IT Governance
José Tomaz
Kreyon Conference 2017, Rome, Italy
September, 6th

2. Abstract
Empirical research has shown a strong link between effective IT governance and organizational performance: organizations may increase their return on IT investments by as much as 40 % with the help of well-organized IT governance (Weill,2004).
$1.4 trillion USD
According to CompTIA global IT industry growth of 4.1 percent in 2017 will project global IT industry past the $3.5 trillion USD mark by year’s end.
What could we do with 40% of IT budget?

3. Problem: Are we using the right tools?
It’s not only lot of money, but also …
Human and technical resources wasted,
Delayed projects,
Services not delivered,
Inefficient processes,
Unhappy customers, tax payers or pacients…
Affects profit and non-profit organizations, private, public and governmental
Challenge: digital transformation, IoT, UAD, 3D prt
Empirical studies and historical data, linear approach

4. Use Agent-Based Modeling ABM that emulates in each organization:
Problem: Proposal
Use Agent-Based Modeling
ABM that emulates in each organization:
Humans and technical resources,
Investments and projects,
Services and processes,
Deal with risk management (identify, mitigate)
Identify emergent behavior (better insight)
Antecipate results (simulation)
Predict the future (with limitations)
Better decision
Impact of rewards in risk and value creation

5. Agents and Virtual Environment Complexity and Emergence (3-Layer Model)
Risk Management
Technostructure
ABM Organizational Environment
Culture
Ethics
Laws
Contracts
Policies
Norms
Beliefs
Regulations
Risk 2
Risk 1
Risk N
Risk 3
Constraint 1
Constraint 2
Constraint K
Constraint 10 PM
CIO
Agent 1
Agent N
Social
Organizational
Level
(Processes)

6. Complexity and Emergence
(…) human societies are complex, since there are many non-linear interactions between people,
involving transmission of knowledge and materials that often affect the behaviour of the recipients. (…)
it becomes impossible to analyse a society as a whole by studying the individuals within it, one at a time.
The behaviour of the society is said to ‘emerge’ from the actions of its units. [Gilbert, 2004]

7. About a Framework
Designing a model is easier if there are already a body of theory to draw it. (…) one should look around for existing theory, (…). Theories that are about processes of change and that consider the dynamics of social phenomena are of course likely to be more helpful than theories about equilibria or static relationships, but any theory is better than none.[Gilbert, 2004]
Worldwide acceptance
Knowledge reuse
Matches organization’s real world
Easily adapts to its needs
Holistic
Broad organization’s overview
Integrating other frameworks (ISO 9000, 20000, 27000)

8. Responsibility of executives and the board of directors:
IT Governance
Responsibility of executives and the board of directors:
Leadership
Strategic direction
Organizational structures
Processes
People (ambition, greed, rationalization)
Frameworks and best practices
Ensure that the enterprise’s IT sustains and extends the organization’s strategies and objectives
Tone at theTOP!

9. COBIT 5 Framework

10. ABM environment in Netlogo
IT Governance
Managing Processes
Risk Management

11. ABM environment in Netlogo

12. Results The simulation considers a twelve month period
Agents receive an initial reward increase
Reward is stable during the period
Expectation: Agents would take more risky decisions in the organization.

13. Results When the reward stabilizes, with small variations,
The risk decreases (37%) and is optimised (under control at a certain level).

14. Results While rewards are almost constant
Risk decreases and is maintained optimised
Value creation increases at steady pace

15. Conclusions
Since the reward was high during that period, it was expected that the risk taken by the agents would be at the same level or even increase
However the risk decreased and stabilizes at a certain level (acceptable risk)
Resistance to take more risk (contain greedy behavior)
Increase of value creation during the same period, which is beneficial to the organization

16. Future Work
How an annual (7 years) increase rewarding of managers and executives impacts risk management?
Which will be the impact in value creation in middle and long term?
How human traits and regulations impact risk management?
How crisis (human or natural) impact organizations resilience?

17. Questions and Answers
Thank You!

18. References
Bartens, Y., Haes, S., et al.(2016). On the Way to a Minimum Baseline in IT Governance: Using Expert Views for Selective Implementation of COBIT , 48th Hawaii International Conference on System Sciences.
Comptia.org. (2017). CompTIA | 2017 IT Industry Outlook - IT Industry Trends Analysis. [online] Available at: resources/it-industry-trends-analysis-2017 [Accessed 3 Sep. 2017].
Gilbert, N., (2007). Agent-Based Models (Quantitative Applications in the Social Sciences) 1st Edition, SAGE Publications.
Gilbert, N., Troitzsch, K., (2005). Simulation for the Social Scientist
Open University Press; 2 edition.
ISACA, Ed.,COBIT 5 Framework. Rolling Meadows, IL:ISACA, 2012.
ISACA, Ed., COBIT 5: Implementation. Rolling Meadows, IL: ISACA, 2012.
ISACA, Ed., COBIT 5: Enabling processes. Rolling Meadows, IL: ISACA, 2012.
Railsback, S., Grimm, V. (2011) Agent-Based and Individual-Based Modeling: A Practical Introduction, Publisher: Princeton University Press; 8th edition.
Weill, P. Ross, J. (2004). IT Governance. MIT Press.
Wilensky, U. (1999). NetLogo. Center for Connected Learning and Computer-Based Modeling, Northwestern University, Evanston, IL.
Wilensky, U., Rand, W., (2015), An Introduction to Agent-Based Modeling: Modeling Natural, Social, and Engineered Complex Systems with NetLogo (MIT Press) Paperback

19. COBIT 5 Framework