CIOs Must Assess Euro Crisis on Their Enterprises

By SiliconIndia | Wednesday, January 4, 2012

CIOs must act immediately to protect their enterprises with extreme uncertainties plaguing all enterprises operating in the Eurozone. The CIOs need to safeguard their enterprises from the risks of bank default, euro break-up, counterparty bankruptcy, government defaults and employee or customer distress.
Gartner mentions four broad challenges that the euro crisis raises, and examines how the CIO is the best to provide enterprise leadership on addressing those challenges. They are: Market Volatility, Capital Costs, Human Capital Management and Risk Management. Most enterprises and their IT departments are burdened with significant numbers of administrative processes and latent decision-making mechanisms. Today's market conditions require business and government executives to radically restructure their business practices.

From an IT standpoint, operational risk is increased via issues such as changes in contractual obligations and business continuity. The capital markets believe that the risk of government and counterparty default is substantial. There is a continued increase in regulatory compliance initiatives across industries, which aggravates the pressure on audit and risk management assessments and workflows.
"Uniquely positioned within their enterprises, CIOs are at the fulcrum of business and technology, and they are the only executives with sufficient visibility and potential capability to address the challenges posed by today's Eurozone crisis. Business leaders are crying out for CIOs to demonstrate more effectively the capability of IT and, specifically, to add value to the business. Therefore, this crisis also presents CIOs with an opportunity to make substantial and bold steps to meet CEO demands, and demonstrate the importance and true value of IT," said David Furlonger, vice president and Gartner Fellow.

The costs access to capital across Europe will likely continue to worsen until there is a significant redress in structural imbalances between countries and organizations. Unwillingness or inability to write off debt and reconstitute public- and private-sector balance sheets is a strong barrier to market efficiency. Lines of credit will likely become uncertain, forcing corporations to reduce inventory.
Formal government austerity packages and informal corporate restrictions on salaries, benefits and working conditions, combined with high costs of living, are stressing workforces. Millions of people are out of work in Europe. This situation is compounded by retirement funding shortfalls, extensions in the working age and loss of benefits.