scoring-calc whp eng 0615

© 2015 ISACA. All rights reserved.

BUSINESS INNOVATION SCORING CALCULATIONS

ISACA uses a proprietary approach to assess the level of business innovation (BI) that can be expected from a trend. The rating scales and scoring calculations used are described below.

OVERALL BUSINESS INNOVATION SCORE

For each trend, an overall BI index rating is calculated, which represents its expected net value creation.

BI INDEX RATING DESCRIPTIONBI INDEX %

(Expected Net Value Creation)

1. Very Low Is of interest and merits monitoring by management, but not necessarily immediate action by senior management or the board

0-6% (0 to 2)

2. Low Is likely to represent significant value to the business, meriting more detailed analysis by management and discussion by the board (where the level of investment or adverse risk require board approval)

7-19% (2.1 to 6)

3. Medium Is highly likely to represent significant and sustained value and may require adjustment to existing strategies and plans. How the trend should be addressed by the organization merits the attention of the board, following detailed analysis by management and consideration of the risk of competitors adopting the trend. The organization may have time to consider its response, perhaps because the trend is still emerging.

20-38% (6.1 to 12)

4. High The same as level 3, plus prompt action is required if the organization is not to suffer as competitors take advantage of the trend

39-56% (12.1 to 18)

5. Very High Is likely to create significant disruption within the industry, affecting the organization and its competitors. Adoption of the trend by competitors is highly likely as is the potential for disruption of the current business model.

57-100% (18.1-32)

Business Innovation Scoring Calculations


2

Business innovation is a function of benefit realization, risk optimization and resource optimization. The BI index is derived using the formula:

Expected Net Value Created = Expected (Benefit Realization + Risk Optimization + Resource Optimization)

Where:

• Benefit Realization = Benefit (Impact x Likelihood)

• Risk Optimization = Risk Reduced – New Risk = Existing Reducible Risk (Impact x Likelihood) – Residual Risk (Impact x Likelihood) – New Risk (Impact x Likelihood)

• Resource Optimization = -Resource Cost = -(Investment Cost + Business Operations Disruption [Impact x Likelihood])

For each trend, BI Impact and Likelihood scores are calculated by netting the vector components of Impact and Likelihood from their related Benefit and Risk scores. These BI Impact and Likelihood scores are used to place trends on the overall BI chart. For more information on netting vector components, refer to the theory of vector mechanics as explained in Vector Mechanics for Engineers: Statics and Dynamics, Eighth Edition, by Ferdinand P. Beer and E. Russell Johnston, The McGraw-Hill Companies, USA, 2006.

The components are scored as follows.

BENEFIT REALIZATION

Benefits realization is derived using assessments of Benefit Impact and Likelihood of that impact.

M (4)

H (8)

VH (12)

VH (16)

L (3)

M (6)

H (9)

VH (12)

L (2)

M (4)

M (6)

H (8)

VL (1)

L (2)

L (3)

M (4)

4. Very High

3. High

2. Medium

1. Low

1. Unlikely 2. Possible 3. Likely 4. Very Likely

OVERALL SCORE BENEFIT REALIZATION LEVEL

11 to 16 Very High

8 to 10 High

4 to 7 Medium

2 to 3 Low

1 Very Low

0 None

Impact

Likelihood



3

Benefit Impact: An estimate of the most likely positive impact on businesses of the end state of deploying the trend successfully (at least 80% of the expected benefit realized and risk optimized)

SCALEREVENUE

(Or $ Equivalent)REPUTATION

COMPETITIVE ADVANTAGE

PRODUCTIVITYMARKET VALUE

4. Very High

More than 5% gain in revenue

Or temporary gain of more than 10%

Significant gain in reputation in more than one key group with a stake

Or moderate gain in most groups

Significant gain in ability to deliver on more than one key business plan/objective

Or moderate gain across most business plans/objectives

Significant gain in efficiency in more than one key business unit

Or moderate gain in most business units

More than 10% gain in market value

3. High 2-5% gain in revenue

Or temporary gain of 4-10%

Significant gain in reputation in one key group with a stake

Or moderate gain in more than one group

Significant gain in ability to deliver on one key business plan/objective

Or moderate gain across more than one business plan/objective

Significant gain in efficiency in one key business unit

Or moderate gain in more than one business unit

5-10% gain in market value

2. Medium

1-2% gain in revenue


Moderate gain in reputation in one key group with a stake

Moderate gain in ability to deliver on one key business plan/objective

Moderate gain in efficiency in one key business unit


1. Low Less than 1% gain in revenue

Or temporary gain of up to 2%

Small/temporary gain in reputation in one or more group with a stake

Small/temporary gain in ability to deliver on one or more business plan/objective

Small/temporary gain in efficiency in one or more business units

Less than 2% gain in market value

0. None No gain in revenue No gain in reputation in any group with a stake

No gain in ability to deliver on any business plan/objective

No gain in efficiency in any business unit

No gain in market value

NOTE: Temporary is less than 2 years.



4

Benefit Likelihood: An estimate of the proportion of businesses that will receive the expected Benefit Impact

SCALE LIKELIHOOD OF GAIN DESCRIPTION

4. Very Likely More than 80% of businesses Most (possibly all) businesses in most (possibly all) industries/sectors would gain.

3. Likely 50-80% of business Most (possibly all) businesses in some industries/sectors would gain, although some industries/sectors may not be relevant.

Or some businesses in most (possibly all) industries/ sectors would gain.

2. Possible 10-50% of businesses Most (possibly all) businesses in a few industries/ sectors would gain.

Or some businesses in some industries/sectors would gain.

Or a few businesses in most (possibly all) industries/sectors would gain.

1. Unlikely Less than 10% of businesses Some businesses in a few industries/sectors would gain.

Or a few businesses in some industries/sectors would gain.

Or a few businesses in a few industries/sectors would gain.

Or it is not yet known if any businesses would gain, but there is plenty of speculation.



5

RISK OPTIMIZATION

Risk Optimization is derived using assessments of Existing Reducible Risk (Impact x Likelihhod), Residual Risk (Impact x Likelihood) and New Risk (Impact x Likelihood).

M (4)

H (8)

VH (12)

VH (16)

L (3)

M (6)

H (9)

VH (12)

L (2)

M (4)

M (6)

H (8)

VL (1)

L (2)

L (3)

M (4)

4. Very High

3. High

2. Medium

1. Low


OVERALL SCORE RISK OPTIMIZATION LEVEL

11 to 16 Very High

8 to 10 High

4 to 7 Medium

2 to 3 Low

1 Very Low

0 None

M (4)

H (8)

VH (12)

VH (16)

L (3)

M (6)

H (9)

VH (12)

L (2)

M (4)

M (6)

H (8)

VL (1)

L (2)

L (3)

M (4)

4. Very High

3. High

2. Medium

1. Low


M (4)

H (8)

VH (12)

VH (16)

L (3)

M (6)

H (9)

VH (12)

L (2)

M (4)

M (6)

H (8)

VL (1)

L (2)

L (3)

M (4)

4. Very High

3. High

2. Medium

1. Low


Existing Reducible Risk Residual Risk

New Risk

ImpactImpact

LikelihoodLikelihood

Impact

Likelihood



6

Existing Reducible Risk Impact: An estimate of the most likely negative impact on businesses of an existing risk that could be reduced by deploying the trend successfully (at least 80% of the expected benefit realized and risk optimized)

SCALEREVENUE

(Or $ Equivalent)

REPUTATIONCOMPETITIVE ADVANTAGE


LEGAL/REGULATORY COMPLIANCE

4. Very High

More than 5% loss in revenue

Or temporary loss of more than 10%

Significant loss in reputation in more than one key group with a stake

Or moderate loss in most groups

Significant loss in ability to deliver on more than one key business plan/objective

Or moderate loss across most business plans/objectives

Significant loss in efficiency in more than one key business unit

Or moderate loss in most business units

More than 10% loss in market value

Regulatory sanction

Or personal prison

Or large class action

3. High 2-5% loss in revenue

Or temporary loss of 4-10%

Significant loss in reputation in one key group with a stake

Or moderate loss in more than one group

Significant loss in ability to deliver on one key business plan/objective

Or moderate loss across more than one business plan/objective

Significant loss in efficiency in one key business unit

Or moderate loss in more than one business unit

5-10% loss in market value

Regulatory fine

Or personal conviction

Or significant legal liabilities

Or medium class action

2. Medium

1-2% gain in revenue


Moderate gain in reputation in one key group with a stake

Moderate gain in ability to deliver on one key business plan/objective

Moderate gain in efficiency in one key business unit


Regulatory finding

Or moderate legal liabilities

Or small class action

1. Low Less than 1% gain in revenue

Or temporary gain of up to 2%

Small/temporary gain in reputation in one or more group with a stake

Small/temporary gain in ability to deliver on one or more business plan/objective

Small/temporary gain in efficiency in one or more business units

Less than 2% gain in market value

Regulatory comment

Or limited legal liabilities

0. None No loss in revenue

No loss in reputation in any group with a stake

No loss in ability to deliver on any business plan/objective

No loss in efficiency in any business unit

No loss in market value

No legal or regulatory impact




7

Existing Reducible Risk Likelihood: An estimate of the proportion of businesses that are experiencing the estimated Existing Reducible Risk Impact

SCALE LIKELIHOOD OF GAIN DESCRIPTION

4. Very Likely More than 80% of businesses Most (possibly all) businesses in most (possibly all) industries/sectors would be damaged.

3. Likely 50-80% of business Most (possibly all) businesses in some industries/sectors would be damaged, although some industries/sectors may not be relevant.

Or some businesses in most (possibly all) industries/sectors would be damaged.

2. Possible 10-50% of businesses Most (possibly all) businesses in a few industries/sectors would be damaged.

Or some businesses in some industries/sectors would be damaged.

Or a few businesses in most (possibly all) industries/sectors would be damaged.

1. Unlikely Less than 10% of businesses Some businesses in a few industries/sectors would be damaged.

Or a few businesses in some industries/sectors would be damaged.

Or a few businesses in a few industries/sectors would be damaged.

Or it is not yet known if any businesses would be damaged, but there is plenty of speculation.



8

Residual Risk Impact: An estimate of the most likely remaining negative impact on businesses of an existing risk that has been mitigated by deploying the trend successfully (at least 80% of the expected benefit realized and risk optimized), using the same table used for Existing Residual Risk Impact

Residual Risk Likelihood: An estimate of the proportion of businesses that would experience the estimated Residual Risk Impact, using the same table used for Existing Residual Risk Likelihood

New Risk Impact: An estimate of the negative impact on businesses of the newly introduced risk that results from deploying the trend successfully (at least 80% of the expected benefit realized and risk optimized), using the same table used for Existing Residual Risk Impact

New Risk Likelihood: An estimate of the proportion of businesses that would experience the estimated New Risk Impact, using the same table used for Existing Residual Risk Likelihood

RESOURCE OPTIMIZATION LEVEL

Resource Optimization is derived using assessments of Investment Cost and Business Operations Disruption (Impact x Likelihood).

Investment Cost: An estimate of the financial cost (negative impact) on businesses of the investment to deploy the trend successfully (at least 80% of the expected benefit realized and risk optimized). This may include short-term costs (i.e., salaries for the project team) and long-term costs (i.e., salaries for new ongoing roles, tech support contracts). This does not include any reductions in other investments as a result of the deployment; e.g., a new system deployment may result in the retirement of a previous system and therefore its associated ongoing support costs (including maintenance).

SCALE INVESTMENT COST

8. Exceptional

Equivalent to more than 1% loss in revenue

Or a temporary loss of more than 2%

4. Very High

Equivalent to 0.75-1% loss in revenue

Or a temporary loss of 1.5-2%

3. High

Equivalent to 0.5-0.75% loss in revenue

Or a temporary loss of 1-1.5%

2. Medium

Equivalent to 0.25-0.5% loss in revenue

Or a temporary loss of 0.5-1%

1. Low

Equivalent to 0-0.25% loss in revenue

Or a temporary loss of 0-0.5%

0. None Equivalent to no loss in revenue


OVERALL SCORE RESOURCE OPTIMIZATION LEVEL

16 to 24 Exceptional

11 to 15 Very High

8 to 10 High

4 to 7 Medium

2 to 3 Low

1 Very Low

0-0.9 None



9

Business Operations Disruption Impact: An estimate of the negative impact on businesses of the disruption associated with deploying a trend successfully (at least 80% of the expected benefit realized and risk optimized). The size, scope and duration of the people/process/technology change that businesses will have to go through to deploy the trend successfully are considered.

SCALEREVENUE

(Or $ Equivalent)

REPUTATIONCOMPETITIVE ADVANTAGE


LEGAL/REGULATORY COMPLIANCE

POSSIBLE SCENARIOS

4. Very High

More than 5% loss in revenue

Or temporary loss of more than 10%

Significant loss in reputation in more than one key group with a stake

Or moderate loss in most groups

Significant loss in ability to deliver on more than one key business plan/objective

Or moderate loss across most business plans/objectives

Significant loss in efficiency in more than one key business unit

Or moderate loss in most business units

More than 10% loss in market value

Regulatory sanction

Or personal prison

Or large class action

For more than 1 year, all business units/divisions have significant people/process/technology change—an example could be a business model change.

3. High 2-5% loss in revenue


Significant loss in reputation in one key group with a stake

Or moderate loss in more than one group

Significant loss in ability to deliver on one key business plan/objective

Or moderate loss across more than one business plan/objective

Significant loss in efficiency in one key business unit

Or moderate loss in more than one business unit


Regulatory fine

Or personal conviction

Or significant legal liabilities

Or medium class action

For more than 1 year, all business units/divisions have low to moderate people/process/ technology change.

Or one or more business units/divisions have significant people/process/technology change.

2. Medium

1-2% loss in revenue


Moderate loss in reputation in one key group with a stake

Moderate loss in ability to deliver on one key business plan/objective

Moderate loss in efficiency in one key business unit


Regulatory finding

Or moderate legal liabilities

Or small class action

For less than 1 year, all business units/divisions have low to moderate people/process/technology change.

Or one/more business units/divisions have significant people/process/technology change.

1. Low Less than 1% loss in revenue

Or temporary loss of up to 2%

Small/temporary loss in reputation in one or more group with a stake

Small/temporary loss in ability to deliver on one or more business plan/objective

Small/temporary loss in efficiency in one or more business units

Less than 2% loss in market value

Regulatory comment

Or limited legal liabilities

For less than 1 year, one/more business units/divisions have low to moderate people/process/technology change

0. None No loss in revenue

No loss in reputation in any group with a stake

No loss in ability to deliver on any business plan/objective

No loss in efficiency in any business unit

No loss in market value

No legal or regulatory impact

No disruption in any business units/divisions




10

Business Operations Disruption Likelihood: An estimate of the proportion of businesses that would experience the estimated Business Operations Disruption Impact

SCALE LIKELIHOOD OF DISRUPTION DESCRIPTION

4. Very Likely More than 80% of businesses Most (possibly all) businesses in most (possibly all) industries/sectors would be disrupted this much.

3. Likely 50-80% of business Most (possibly all) businesses in some industries/sectors would be disrupted this much, although some industries/sectors may not be relevant.

Or some businesses in most (possibly all) industries/sectors would be disrupted this much.

2. Possible 10-50% of businesses Most (possibly all) businesses in a few industries/sectors would be disrupted this much.

Or some businesses in some industries/sectors would be disrupted this much.

Or a few businesses in most (possibly all) industries/sectors would be disrupted this much.

1. Unlikely Less than 10% of businesses Some businesses in a few industries/sectors would be disrupted this much.

Or a few businesses in some industries/sectors would be disrupted this much.

Or a few businesses in a few industries/sectors would be disrupted this much.

Or it is not yet known if any businesses would be disrupted this much, but there is plenty of speculation.



11

ASSESSMENT CONFIDENCE

Confidence in each trends assessment is determined.

RATINGCHANCE THAT

ASSESSMENT IS WRONGDESCRIPTION

Very High >1:10 More than 90% probability that reality is within the assessed ratings.

• Ratings are based on high-quality information from multiple trusted (nonbiased) sources or a single highly reliable source, or the nature of the issue makes it possible to render a solid judgment. If any remaining uncertainties exist, they could only have a low effect.

• Ratings are based on high-quality information from multiple trusted (nonbiased) sources or a single highly reliable source, or the nature of the issue makes it possible to render a solid judgment. Remaining uncertainties exist that could have a moderate effect.

• Ratings are based on good-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. If any remaining uncertainties exist, they could only have a low effect.

High 1:5-10 Between 80-90% probability that reality is within the assessed ratings.

• Ratings are based on high-quality information from multiple trusted (nonbiased) sources or a single highly reliable source, or the nature of the issue makes it possible to render a solid judgment. Remaining uncertainties exist that could have a significant effect.

• Ratings are based on good-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. Remaining uncertainties exist that could have a moderate effect.

• Ratings are based on uncertain-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. If any remaining uncertainties exist, they could only have a low effect.

Medium 1:2-5 Between 50-80% probability that reality is within the assessed ratings.

• Ratings are based on good-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. Remaining uncertainties exist that could have a significant effect.

• Ratings are based on uncertain-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. Remaining uncertainties exist that could have a moderate effect.

Low <1:2 Less than 50% probability that reality is within the assessed ratings.

• Ratings are based on uncertain-quality information from multiple semi-trusted sources or a single trusted (nonbiased) source. Remaining uncertainties exist that could have a significant effect.

scoring-calc whp eng 0615

Documents