Information Technology Project Risk Management

This assignment delves into the crucial topic of risk management within information technology projects. It examines diverse perspectives on risk assessment, mitigation strategies, and the importance of effective risk management frameworks in ensuring project success. The provided readings encompass a range of viewpoints, from practical guidelines to theoretical analyses of the challenges and opportunities presented by risk in IT project environments.

RUNNING HEAD: OUTSOURCING KEY IT FUNCTIONALITIES 1
Outsourcing key IT functionality to a third party
Name:
Affiliation:
Date:

OUTSOURCING KEY IT FUNCTIONALITIES 2
Executive Summary
Information technology plays a vital role in any organization. This report is based on an
overview of outsourcing key IT functionality from a third party in Aztek. Aztek is a business
organization that is popular in the Australian financial services sector. The proposed project of
outsourcing of main IT functionality from a third party involves the range of information
technology functions in a business process such as network software and hardware, operation
system, app development, transaction process, distribution of micro and minicomputer system
among many others. Thus, the idea of outsourcing IT functions from a third party together with
organizational, financial and logical considerations aids to develop a prospective business
operation in the financial sector industry. Outsourcing of IT functions from a third party is a
popular act in the mainframe of the financial service sector industry. If enterprises in the
financial service sector like Aztek aim to operate their businesses successfully, it is necessary for
them to outsource critical IT functionalities from a third party vendor. What the project of
outsourcing major IT features from a third party is of benefit to business as it is said to reduce
the operation cost. If a financial service sector embraces outsourcing of key IT functions for a
long-term, helps change varying cost into a fixed cost operation and is easy to predict the future
and this contributes to properly running the system.
An organization like Aztek have to share this type of information to the personnel of the client
upon implementation of outsourcing key IT functions to a third party. Auditing rights to
information security is also a problem with the project of outsourcing IT functions in operational
procedures of the financial service sector. Most organizations in the financial industry fail to
establish agreements with the outsourced third party during the negotiation process of the IT
functions which cost them additional payments in the time of system crash to come up with a

OUTSOURCING KEY IT FUNCTIONALITIES 3
backup for lost data. Many outsourcers do nor give rights to access their daily responsibilities of
data generated from the server or database to the client's human resource management. It is
associated with great problems since the outsourcers' staff have no clear knowledge of their
business procedures, or the firm's major customer's hence huge data loss, and theft chance is
created. Aztek need to put their offshore operations in control to address this issues. The
company's management should also negotiate apparently on who should be granted access
permission. The outsourcer is supposed to set the rules on who accesses the system. People login
ID will be fixed for every personnel and client by the outsourcer's administrator. The admin will,
therefore, be responsible for monitoring customers' information together with access data in the
system. The third party will foresee that the staff only use the company's devices for making
customers applications.

OUTSOURCING KEY IT FUNCTIONALITIES 4
Table of Contents
Introduction..................................................................................................................................................4
Financial service sector review...................................................................................................................6
Current Practices and security posture review.........................................................................................9
Pros and cons of outsourcing key IT functionality to a third party......................................................11
Threats, vulnerabilities and consequences assessment...........................................................................13
Threats of outsourcing IT services...........................................................................................................13
Vulnerabilities of outsourcing IT services...............................................................................................14
Consequences of assessment of outsourcing IT services.........................................................................15
Data security...............................................................................................................................................16
Security issues of outsourcing.................................................................................................................16
Process of controlling outsourcing security issues..................................................................................16
Conclusion..................................................................................................................................................18
References...................................................................................................................................................19

OUTSOURCING KEY IT FUNCTIONALITIES 5
Introduction
From the perspective view of information technology, IT risk management is one of the most key
use for a company's risk management. IT manages risks that are linked to the IT sector like
network, desktop, mobile computing and other associated applications such as ICT, ERP, and
KMS among others. Use of IT has greatly been employed in the financial service sector
currently. Most of the organizations specifically bankers in the financial sector outsources IT
functions like network, desktop, mobile computing and other associated applications to a third
party vendor to make their procedures digital. Information technology is among the numerous
valued systems that make businesses run their activities automatically. This report evaluates the
risk management process concerning outsourcing of major IT functionalities within Aztek. The
organization runs their operations fruitfully in the Australian financial services sector. Aztek has
a portfolio of projects to for implementation with the view of automating the system within the
firm's operational procedures (Pfleeger, 2003). The company has outsourced its key IT
functionalities like desktop management, network and other application development from a
third party vendor.
Outsourcing of this functionalities will bring about a capital agreement to Aztek from the
perspective of improving the flow of cash within the company. The outsourcers would be fully
responsible for availing the system and service guarantee if Aztek outsourced the key IT
functions from a third party. They will, however, benefit like admin of the outsourcing
organization to come up with the right program by the company's specialist. The administrator
will be tasked with making an individual login database in IDs for the personnel as well as
perform a continuous system upgrade. Aztek will be able to have an overall information system
in their surrounding through the key IT functions outsourcing project from a third party. Aztek as
the outsourcer will be performing duties such as accessing, control and administration of

OUTSOURCING KEY IT FUNCTIONALITIES 6
security, installing information security software and maintaining the installed software. The
company will also perform other tasks such as investigation and review of report violation,
maintaining processes and policy of clients' information security, establish a relationship with its
staff and customers, tactics and awareness building to use of information security system through
training and others. Aztek will face the main issue of sharing data with the personnel of the
outsourcer upon its implementation of outsourcing IT service project to a third party. It will be
constituted by the fact that the company keeps client's information together with other several
sensitive information that is related to their business such as target market, details of the bank,
target customers and many other things.
Financial service sector review
The financial service industry is an attractive area that varies its organizational processes as time
goes by. IT in financial service industry specifically in the operational procedures of Aztek have
been witnessing great changes especially in the company's business process (Jin & Du, 2014).
The company has experienced tough competition in the financial industry which has resulted in
declining in their clients' base. Moreover, the cost framework of Aztek which is uneconomic has
been locked. Stiff competition has forced the company to establish extreme capacity in its
organization processes and lower the profit margins. The best way of provocation to the
company towards the establishment of a great risky portfolio and doing away with the margins is
to embracing a marginal edge of risk thinking (Acquisti, 2008). Numerous barriers in the
financial service sector restrict Aztek and make its condition worse than those of their rivals. Due
to this, competition in the organizational procedures, Aztek is operating at two medium levels as
a result of slow technology development and other common factors. The financial service sector
is likely to underperform in the current world with the use of IT systems in its business process.

OUTSOURCING KEY IT FUNCTIONALITIES 7
IT is one of the key critical technologies in the financial sector that makes the generation of
processes automatic (Borek, 2014). There are some different types of IT system in Australian
financial sector that aid in the provision of information, management of market inventory, and
billing among others. Outsourcing critical IT functions will help Aztek establish a broad
customer base.
The company can be in a place to offer improved services to its clients through the fulfillment of
their needs and attract more clients by the adoption of an information technology system in its
business process (Coplan & Masuda, 2011). Many business organizations within the financial
service industry have outsourced their key IT functions to a third party and diversified their
processes which have greatly contributed to the generation of high revenues as well as
consolidation of their organization's operational processes. Realization of high-profit margins
and information technology in the financial sector helps lower the complexity level and
dependence on the accumulated interest. Consequently, some enterprises in the financial sector
consolidate as a result of main regulation changes in their processes. The consolidation resulting
from IT functionalities have led to increased assets associated with security like the use of
antivirus, ant hacking technology, and others. The financial service industry has been a great
success in its business operations in the past few years due to putting these types of strategies in
place (Dinsmore & Cabanis-Brewin, 2011). However, not all are successful because of
diversification of revenue results to a mix between interest and non-interest income. This is
among the negative sides of IT systems because the third party vendor from whom Aztek
outsourced their key IT functionalities acted negatively. Most bankers changed their product
value from negative to positive in the financial services sector since the outsourcing of IT
functions from a third party. Adoption of an IT system also saw the banking sector increase its

OUTSOURCING KEY IT FUNCTIONALITIES 8
value of products from savings to fixed deposits as well as improve the annual products value to
premium products. The IT system also makes it possible for banking companies in rigid products
flexibility, increase the level of advice from high to a level of having extended service and
creating a new customer base and increased marketing.
Provision of excellent services such as e-payments in the financial service industry provided by
IT systems makes the companies in the sector make them achieve high customer retention and
attracting new clients. Insurance businesses in the area have been able to shift their services from
cultural products to a service culture with the help of IT systems. The financial service sector has
also contributed to the improvement of the quality of service through implementation of a
method that uses IT and uses IT functionalities from a third party (Schiesser, 2010).
Organizations have been able to achieve fast service delivery in areas such as documentation
products like billing, information, etc. through the implementation of a computer system that
does not keep customers waiting for long. IT makes it possible to better the handling processes
associated with claims and advice via telephone. However, the information technology within
these organizations in the financial service sector faces some challenges like standardization of
products because of the specialized high system, high chance of possible loss of data or hacking
of the information from the system server. Introduction of the IT system in the industry has
brought the business world greatly (Shah & Clarke, 2009). Information technology works to
ensure that business process run smoothly and the organizations reap a broad variety of benefits.
Use of IT system in the financial service industry has led to a development of an automatic
process involving a high range of security. Thus, IT is very key in the removal of organization's
local barriers in the financial service sector as well as in any other industry. Implementation of
IT system makes it possible to change the view for the organization from the perspective view of

OUTSOURCING KEY IT FUNCTIONALITIES 9
the global market. Within the IT market, some companies give hardware and software packages
services for operational processes of the financial industry (Schwalbe, 2014). IT help complex
organizations achieve the value for service management in the financial sector. To create
products or value in the business of financial service industry, IT has a great impact on the
marginal cost that reacts directly with the revenue. Implementation of the outsourcing of key IT
functions will be of great importance to operational processes of Aztek (Bellini, 2009). These
include service development, process development, integration of stakeholder, improving the
cost-effectiveness and globalization among other benefits.
Current Practices and security posture review
Outsourcing of key IT functionalities in the business process of Aztec can cause the culmination
of making sense for the company which is one of the most important procedure to organizations
in the financial service industry. Making sense makes it possible for organizations to scan the
entire surroundings and interpret it according to with each other. The interpretation made
facilitates action taking (Xu, 2013). In the view of this, outsourcing key IT functions from a third
party at Aztek is an important method for maintaining security and the right operational process
(Tibble, 2012). Outsourcing key IT functionalities from a third party vendor at Aztec can help in
the network development and an adaptive communication process within the workplace that will
allow the monitoring of the work performance of personnel (Better et al., 2008). Information
technology networks like the knowledge management system or the ERP make it possible for
organizations to integrate with the other with ease. Aztek will have a lot of issues in recovering
the financial resources employed in the project which is not the only the affected but also the
company growth rate too. Outsourcing will present the business with a good chance of search for
the right resource like appropriate vendors, competent staff, shareholders, suppliers, etc. which

OUTSOURCING KEY IT FUNCTIONALITIES 10
can drive it towards success and increased growth (Caldwell, 2008). If Aztek outsources basic IT
functionalities from a third party, they will establish a wide network area incorporating staff,
shareholders, suppliers as well as the connection of management to each other. This will help
create the right resources to improve their employees work performance and increase its growth.
According to Roper (2011), outsourcing of key IT functionalities within an organization process
scanned the company's environment thus culminating it business operations. It is this view that
outsourcing of major IT functions from a third party has been termed effective in the business
process of the financial service industry.
Implementing the outsourcing project at Aztec process will greatly address the current pressure
that the company faces. This makes the outsourcing IT functions from a third party vendor is the
most effective way to increase the firm's profits together with the productivity (Dogra, Khara &
Verma, 2007). The availed services by the third party will greatly reduce the operational costs of
Aztek and hike its productivity. The outsourcing will also provide the organization with the
benefit of having an IT expert who will be provided by the third party who will then train the
company's staff on the technology. The company will also be fully responsible for maintaining
the security of the implemented system by the third party. One of the hard parts to undertake the
project will be budgetary constraint within the organizational process of Aztec. The company can
achieve access to information in the financial industry and constraint the budgetary if it
outsourced specific functions of IT assets (Bodea & Dascalu, 2010). The process of outsourcing
key IT functionalities with an enterprise in financial service sector can portray the transaction
cost theory contradiction. The implementation of the outsourcing project can help the company
monitor its costs in an improved way. The technology tactics also lower the product cost.
Adoption of IT in the business process lower the labor needed to operate in the financial service

OUTSOURCING KEY IT FUNCTIONALITIES 11
sector which in turn reduces the operational costs. Involving a third party vendor tasks them with
designing of an automatic information sharing within the network. IT resources can encourage
the process of decision-making within a company and thus discourage the cost transaction theory
(Jung, 2013). Outsourcing strategy will be key in the most business process of the company from
the perspective view that encompasses the leveraging possibility. Thus, outsourcing the key, IT
functions from a third party can lead to a strategic benefit at Aztec. The outsourcing of IT
functionalities presents Aztec with a key impact in restructuring its organizational process in the
long-term return (Caron & Salvatori, 2014).
Third party vendor will also help the company I maintaining information security system
because they are experienced in handling any time of issues that are likely to be present in the IT
system. Therefore, implementation the IT functionality to outsource vendor will be of great
advantage to Aztec (Nichols, 2014). Caron and Salvatori (2014) stated that outsourcing an
organization's IT specializes in maintaining information security. The providers can aid in
transforming the current information system for the company with the use of valuable assets to
tighten the security. In this context, outsourcing key IT functions gives information for the
development of the application at Aztec with the view of migrating or updating present in the
application security. The critical process of outsourcing IT functionalities in the financial sector
helps in saving the personnel for long-term evaluation process (Mehan, 2008).
Pros and cons of outsourcing key IT functionality to a third party
for many years now, Aztec has been opting to implement the project of outsourcing the key
information technology functionality to the third party there are some advantage as well as
disadvantage which has been associated with this these aspects are highlighted as follows.
Pros

OUTSOURCING KEY IT FUNCTIONALITIES 12
Convenience: outsourcing on the key IT functionality leaves the business to focus to the other
significant aspects to the business. The organization would focus to the other aspect of the
business.
The organization can gain more cost savings: with the outsourcing of the key IT functionality
Aztec they would save the costs. The organization will only pay to the third party providers to
per project or even the pay only for the hours rendered. There is no paying for any commission
or even the full time salaries.
Gain of more functionality from the project: The organization has the capability of gaining
significantly from the functionality provided by the third parties. In most of the time the third
parties usually have skills as well as technical knowhow on how to integrate the external
functionalities, features along with the services which could be corporate to the organization
(Dadios, 2012).
Better support services for the outsourced functionality: The third parties providers could deliver
extended services in regards to any upgrade or even troubleshooting functionality of an
application to be able to keep the operations to run as smooth as possible.
Cons
Outsourcing of the key information technology functionality to the third party could seems to be
a better proposition to the corporation, but before finalizing their decision to implement they
need to look at the following drawbacks associated to outsourcing.
Security and the privacy leakages: outsourcing entails you provide the organization with the
access to the private as well as sensitive information of the organization. the organization will
have less control to the access of the data.

OUTSOURCING KEY IT FUNCTIONALITIES 13
Cost: the convenience usually comes at a given price; the overall cost of utilizing the third party
functionality is far much greater than if Aztec managed on their own functionality.
Potential loss to reputation: The third party provider is responsible to the most vital functions
within the organization. In the event they make a mistake this could be reflected directly to the
business and the clients may not accept any passing of this shortcoming to the subcontractor the
business outsourced (Dadios, 2012).
Threats, vulnerabilities and consequences assessment
As a result of developments and innovations in the area of technology, there have been huge
effects on the process of interaction between banks and counterparties, customers, and also
suppliers and how they do their daily activities (Dadios, 2012). Organizations in the financial
sector are facing challenges and problems in responding, innovating and adapting to different
chances presented by networks, technological solutions, as well as computer systems. IT presents
banks with many opportunities and also helping them expand their services and products
(Drummond, 2011). However, IT dynamic come with various risks.
Threats of outsourcing IT services
Security threats affect organizations in the financial service sector like Aztec via some
vulnerabilities. Outsourcing of one IT system cannot be enough to guard the entire Aztek system
with a public network (Gottschalk, 2009). The organization can improve the effectiveness of the
security of the IT system by establishing different testing, control and monitoring procedures that
can help curb the impending risks that depend on different factors (Kim, 2012). Despite the use
of IT services bringing numerous benefits to companies like Aztek, outsourcing of IT functions
has posed threats to many organizations (Dey & Kinch, 2008). Focusing from the time before

OUTSOURCING KEY IT FUNCTIONALITIES 14
when technology was not widely employed to the current time, various threats have been
developed within the financial sector. The possible threats that the company is likely to face are:
 Customer protection-customer protection is very important in internet financial service.
The organization should ensure that its customers are well protected, and allowance to
access of sensitive customers' information should be well monitored (Mercuri &
Neumann, 2011). Aztek faces the threat of hacking that may expose its information and
that of other stakeholders in danger.
 Data confidentiality –this is the protection of confidential information from unintended
parties and unauthorized access. Aztek faces a threat the ability to protect information via
software and also data loss. Through outsourcing, the company will not be sure of the IT
environment of the third party hence chances of external attacks.
 System availability- the system needed to maintain public confidence through an online
framework is of high quality. The company is not sure of the quality of the resources
hence a threat.
 System integrity-this is the reliability, completeness, and accuracy of information being
processed, transmitted and stored between Aztek and customers (Parley, 2010). This
faces flaws from the process of outsourcing hence a threat.
Vulnerabilities of outsourcing IT services
Financial service companies may be misled due to the security dangers exposures and danger of
becoming a victim of a breach of security which might cause serious issues for the organizations
and their customers (Peng et al., 2009). Aztek faces the current automatic system of managing
vulnerability which is highly used for monitoring the information risks that have portrayed flaws
which can't resolve the results. The effect can include wrong security vulnerabilities, possible

OUTSOURCING KEY IT FUNCTIONALITIES 15
exploitation as a result of cybercriminals, inefficient use of IT resources and outdated IT
resources that cause high employee turnover.
With the concern such as the increase in the computer crimes as well as the growing control of
the government over the practices as well as the protection of the private information, the real
focus should be whether or even not to outsource the information technology application is a
viable option given the associated risks in the data security.
Whether an organization is hiring the third party for the support of the desktop, security testing
or even the monitoring of the network, the greater the number of the electronic assets the
organization has the greater is the risk to management of the assets (Acquisti, 2008).. The
potential for any loss increases given the endless amount of the data which has been stored to
various computers. Most of the information technology consultants are trustworthy but also some
are not. Seemingly some of the bad individuals are doing bad things especially when the
applications have been outsourced (Acquisti, 2008). It is important to not before giving up the
information technology reigns, there is need to consider a few things. The information
technology related issues need to be viewed in terms of the perspective of the hacker. It means
one should consider what could happen if ones confidential data gets into the wrong hands.
Most of the outsourced information technology application entails someone somewhere have
access to a portion. This could translate to the full access to the data of the corporate organization
which is stored to the local drives or potentially, network which are shared.
There is also the risk of security breaching as outsourcing key IT functions which is dependent
on a third party.

OUTSOURCING KEY IT FUNCTIONALITIES 16
Consequences of assessment of outsourcing IT services
There are various risks that Aztec face in the project of outsourcing key IT functionalities. The
company needs to come up with proper risk management process in place of outsourcing their
key IT functions. To have an effective implementation process of the IT project, the company
can follow the following risk management procedure;
 Risk identification
 Risk assessment
 Risk treatment
 Risk reporting and monitoring
Data security
Security issues of outsourcing
The security issues that the project faces from the third party include:
 Access of the outsourcer to the company's data- when Aztek outsources IT functionality,
it will give the third party authority to access staff information. The outsourcer has no
idea on what information is crucial to achieving high data security.
 Data destruction, backup, and retention- this is the main issue faced by financial service
sector when an organization outsources IT functionality from a third party vendor (Prado,
2011). Most of the third parties do not mention on the data destruction, backup and
retention during the agreement of implementing the project.
 Sharing resources of the computers with the outsourcer- as the outsourcer is the major
player in the project within a firm, Aztek has to provide permission to access information
to the outsourcer.

OUTSOURCING KEY IT FUNCTIONALITIES 17
Other security issues are: Determination of program and data ownership and audit rights of
information security to the outsourcer
Process of controlling outsourcing security issues
To control the above security issues upon Aztek outsourcing information technology from a third
party, the company need to maintain the following procedure:
Controlling offshore operation: an organization within the service sector need to manage
employment and physical security that equate to its organizational process. High security will be
a vital step for the approach of addressing these problems. Applying rigorous security policy will
be the best procedures for Aztek on the implementation of the outsourcing IT functionalities to a
third party.
Access rights: when Aztek involves the third party in providing IT services, they will have to
communicate properly about access rights for the outsourcer’s staff. Necessary equipment and
the process will be the right security way for data security. Aztek has to come up with profiles
for each person within their company as well as outsourcer’s staff. The company will agree and
append signatures with the outsourcer for changing the passwords or access control in the case
when the team change their roles or quit the job. The same procedure will be applied when a new
person joins the organization.
Password and User accounts: to establish proper security in the company, Aztek has to agree
with their idea of outsourcer and create individual user accounts for the staff and clients.
Customers’ information will be required to establish a program that requires a password. To
make a standard password, the company need to conduct a review from getting a safe online
group. A good password should be that composed of at least 10 characters length both letters and
numbers.

OUTSOURCING KEY IT FUNCTIONALITIES 18
Authentication: authentication is a great issue in any industry that has information security
system. The authentication should be maintained in a way that it protects customer’s data.
Data backup: Aztek has to carry out an appropriate risk assessment of the data security in the
impending threats. It can be enabled by use of an encryption method and a continuous review on
the level of the encryption.
Conclusion
This report has provided detailed information regarding IT process if an organization in the
financial sector outsources its key IT functionalities from a third party. The case study is an
Australian firm operating in the financial industry. The report analyses all relevant information
about IT functions in the financial service together with the legal framework. The report also
compares the current practices at Aztek and the impact of the current project on its
organizational process. The last section is composed of the threats, vulnerabilities, and
consequences of assessment and data security in conclusion. IT plays a key role in businesses in
the financial sector as well as any other sector. It, however, has possible risks that should be
highly guarded to reap its benefits.

OUTSOURCING KEY IT FUNCTIONALITIES 19
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