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Activity Number:
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470
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Type:
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Topic Contributed
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Date/Time:
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Thursday, August 7, 2008 : 8:30 AM to 10:20 AM
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Sponsor:
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Section on Risk Analysis
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| Abstract - #301683 |
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Title:
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Measuring the Impact of IT Capital Investment in Reducing Operational Risk
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Author(s):
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Deborah Cernauskas*+ and Colin Lawrence
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Companies:
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IBM and FSA
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Address:
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4541 Saratoga Ave, Downers Grove, IL, 60515,
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Keywords:
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operational risk ; IT risk reduction
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Abstract:
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This paper explores the use of a Cobb Douglas Loss production function to capture the impact of IT capital spending in reducing operational losses. The production function relates current IT capital investment spending to operational losses over time. Previous research has shown IT capital investment results in an increase in firm valuation consistent with normal investment returns in the short run. However, it has also been shown that excess returns due to IT investment capital occur over longer time frames. These returns have been attributed to productivity gains and output growth and have ignored operational loss reduction as an alternative explanation. This paper focuses on establishing a relationship between IT capital investment with a reduction in operational losses.
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