A Methodology for Evaluating Information System Development Risk-Structure Equation Model

The efficiency of collecting, analyzing and managing information will have profound influence on enterprise development in the era of knowledge economy. The successful development and application of the information system has become one of the main factors that affect the competitiveness of enterprises. Much resource has been invested to build the information system. However, presently, there are no systematic methodologies to quantify the impact of risks arising from information system development (ISD) process on the final software operation. It is imperative that enterprise management needs such methodology in place to evaluate the impact of various risks on the ISD outcome. In this paper, we introduce structure equation model (SEM) to the evaluating process, taking into account risks at the source and the composition of risks. The evaluation model of ISD risks is then constructed and tested with actual cases. The model is found to be useful in differentiating the types of risks and their impact. It serves as a powerful tool for managers in formulating risk management strategies.