An integrative economic optimization model to is development risk management

This research develops an integrative model to managing IT investment risk from an economic optimization perspective by consolidating and building on the strengths of two research streams. The traditional stream is concerned with software development risk management and its focus on the "building" stage in the IT investment lifecycle enables addressing granular risks using well-established project management practices, but precludes managing risk from a comprehensive economic perspective. By contrast, the more recent stream uses real options theory (ROT) to study the economic implications of risk in relation to the flexibility one can build into IT investments to enable deployment of contingent risk countermeasures. However, this stream's macro level perspective is not geared towards granular risk management practices at the execution level. The economic optimization orientation of our model follows from the use of ROT as an economic basis for unifying micro- and macro-level risk management practices studied by both streams.