Independent Portfolio Analysis
- reporting templates developed by SeaQuation

"Portfolio management helps overcome the disconnect in communications between the business and IT communities. It is an excellent way to deal with the perennial questions about IT value and IT alignment with the business" (Gartner).

The following paragraphs are based upon a SeaQuation paper prepared for and published by the IT Governance Institute as part of their ongoing research into best practices for IT governance. Associates and key staff members of SeaQuation (John Thorp, Eric Guldentops, John Spangenberg and Paul Williams) were amongst the founding fathers of the complement to the well-known CobiT standard, named ValiT (Value of IT). ValiT will be published by ISACA by June 2005.

In the same way that a financial portfolio needs active management (buy, sell or hold) by the investment manager, so too does an IT investment portfolio. An equity or fixed-income portfolio requires constant monitoring against the Dow Jones index or other benchmarks in order to maximise the risk-adjusted portfolio return. This involves making decisions on increasing or reducing individual stock holdings and, in particular, making disposals of non-performing asset. Precisely the same scrutiny needs to be applied to corporate IT investments.

Given its ING origin, it is only natural that SeaQuation adopted a bankassurance perspective on IT and used mainstream Financial Economics to calculate the Alpha (excess return on IT) and Beta (standard deviation of expected return based on loss statistics) of IT investments. The Capital Asset Pricing Model e.g. contributes to determine the risk-adjusted yield of IT investments against the expected return of more familiar asset classes within the corporate investment portfolio such as real estate, M&A, total shareholder's return of company stocks, commodities, private equity, cash, hedge funds or governmental bonds. SeaQuation's bankassurance approach provides the common denominator enabling valid comparisons between the cost, benefit and risk of each of these investment categories and to estimate the opportunity cost.