Perhaps you’re familiar with blockchain technology which first came into the public domain in connection with Bitcoin. It’s a distributed ledger technology that has obvious potential uses beyond cryptocurrencies. People in the investment world became interested early because of the cumbersome way in which financial transactions are settled and recorded today – lots of middlemen resulting in many points at which something could go wrong, high costs and slow time frames. A perfect situation for a disruptive technology!
The article, http://finops.co/trading/blockchain-for-us-settlement-three-two-one-takeoff/, describes an initiative to form an industry advisory group to run a blockchain trial. This group will need to get it right: this is a new technology whose adoption will disrupt the old ways the financial markets. If their trial is robust and produces positive results, the benefits will be enormous. What is absolutely critical is that the trial not produce a false positive – that is, the conclusion that the trial has been successful when in fact the trial process was flawed in some way. In this case, the damage could also be enormous.
Suppose the advisory group reached out to you to ask your advice on how to structure the control environment for their trial program. What elements might you suggest they consider? For example, you might ask them to define the decision making process. In this case, would regulatory oversight from an established body such as the SEC be appropriate or does the past model not apply? How will the testing be conducted and how will weaknesses in the process be identified and addressed? Who should be responsible for reviewing results from a business perspective?
The point here is that in a fast-changing world, some of the most important IT governance challenges are complicated and have no established roadmap. The best we can do is stick with fundamentals: the right things done right will form the basis for a good governance structure.
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