Article2008

Risk Management of Contract Portfolios in IT Services: The Profit-at-Risk Approach

55 citations0/0 files storedJournal of Management Information Systems

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Outsourcing and Supply Chain Management Information Technology Governance and Strategy Risk Management in Financial Firms

Abstract

Information technology (IT) services providers are exposed to exogenous risks faced by the industry as a whole, and endogenous risks from their current portfolio of IT contracts. This exposure may lead to cost overruns or legal responsibility for service-level breeches. Providers can leverage information about their risk positions implied by their IT services contract portfolios to gain strategic advantage over their competitors. We build theory in support of a new construct, profit-at-risk, for evaluating the trade-offs between contract profitability and service-level risk, stemming from financial economics theory and models. We simulate an IT services contract portfolio, and show how managers can reduce organizational risk by forgoing profit-maximizing contracts in lieu of more conservative service-level agreements, yet still achieve high returns. Our approach provides decision support for ex ante contract evaluation and negotiation, and a means to conduct ex post efficiency evaluation. It also aligns IT service management with best practices in financial management.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 55 citations exist upstream.

References

1973The Pricing of Options and Corporate Liabilities 1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1994Investment Under Uncertainty.1999Coherent Measures of Risk 1975THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS**This paper is another in a series of interrelated theoretical and statistical studies of corporate financial and investment policies being made under grants from the Rockefeller Foundation, and more recently the Ford Foundation, to the Harvard Business School. The generous support for this work is most gratefully acknowledged. The author is also much indebted to his colleagues Professors Bishop, Christenson, Kahr, Raiffa, and (especially) Schlaifer, for extensive discussion and commentary on an earlier draft of this paper; but responsibility for any errors or imperfections remains strictly his own.[Professor Sharpe's paper, “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Journal of Finance, September 1964) appeared after this paper was in final form and on its way to the printers. My first section, which parallels the first half of his paper (with corresponding conclusions), sets the algebraic framework for sections II, III and VI, (which have no counterpart in his paper) and for section IV on the equilibrium prices of risk assets, concerning which our results differ significantly for reasons which will be explored elsewhere. Sharpe does not take up the capital budgeting problem developed in section V below.]1979Option pricing: A simplified approach 1976A New Product Growth Model for Consumer Durables 2004A New Product Growth for Model Consumer Durables

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.