IT governance boosts sustainability only through digital financial transformation

Digital financial transformation is the primary driver of economic sustainability performance in public institutions. Using survey data from government entities in Oman and advanced structural equation modeling, the researchers show that organizations that actively digitize financial processes achieve stronger cost efficiency, operational stability, and long-term financial resilience.

Public sector institutions across the Middle East are under growing pressure to deliver economic resilience while accelerating digital reform. With this shift, a key policy question has emerged: can digital transformation actually translate into long-term economic sustainability, or does it risk becoming an expensive modernization exercise with limited returns? New academic evidence from Oman suggests the answer depends less on technology itself and more on how it is governed.

A study titled The Relationship Between IT Governance, Digital Financial Transformation, and Economic Sustainability Performance, published in Administrative Sciences, examines how IT governance and digital financial transformation interact to shape economic sustainability outcomes in the public sector.

Digital finance emerges as the real engine of sustainability

Digital financial transformation is the primary driver of economic sustainability performance in public institutions. Using survey data from government entities in Oman and advanced structural equation modeling, the researchers show that organizations that actively digitize financial processes achieve stronger cost efficiency, operational stability, and long-term financial resilience.

Digital financial transformation, as defined in the research, extends far beyond the adoption of online payment systems. It includes automation of routine financial tasks, integration of digital platforms across agencies, deployment of data analytics for decision-making, and the use of emerging technologies such as artificial intelligence and cloud computing to streamline financial operations. These changes, the study finds, directly reduce operating costs, accelerate service delivery, and improve resource utilization.

In the Omani context, these gains align closely with the goals of Oman Vision 2040, which prioritizes economic diversification, efficiency in public spending, and the development of a digital government. The findings suggest that digital finance is not simply a modernization tool but a structural mechanism that enables public institutions to operate more sustainably in an environment of fiscal pressure and rising service demands.

The research also highlights how digital financial transformation strengthens transparency and accountability. Automated systems reduce manual intervention, limit procedural delays, and improve traceability of transactions. This, in turn, supports public trust and enhances institutional credibility, both of which are essential for economic sustainability in the long run.

However, the study does not present digital transformation as a risk-free solution. It acknowledges that poorly executed digital initiatives can expose institutions to cybersecurity threats, operational disruption, and skills shortages. The decisive factor, the authors argue, is whether digital transformation is guided by coherent governance frameworks rather than implemented in isolation.

Why IT governance matters but cannot deliver results alone

IT governance, while essential, does not directly improve economic sustainability performance. Instead, its impact is indirect and fully mediated by digital financial transformation. In practical terms, this means that governance structures alone do not generate economic value unless they are actively translated into digital action.

IT governance in the study refers to the policies, frameworks, decision rights, and oversight mechanisms that ensure technology investments align with organizational and national objectives. In Oman, these frameworks are largely coordinated through the Ministry of Transport, Communications, and Information Technology and are aligned with international standards such as COBIT, ITIL, and ISO-based governance models.

The research shows that strong IT governance significantly enhances digital financial transformation by improving strategic alignment, risk management, and coordination across agencies. Institutions with clearer governance structures are better equipped to prioritize digital investments, manage cybersecurity risks, and avoid duplication of systems and resources.

Yet governance on its own does not automatically translate into cost savings or economic efficiency. The study finds that governance mechanisms tend to establish capability rather than outcomes. They create the conditions for transformation but do not deliver results unless accompanied by concrete digital initiatives that change how financial operations are conducted.

This distinction has major policy implications. Many governments invest heavily in governance frameworks, steering committees, and compliance systems while underinvesting in the operational side of digital transformation. The research suggests that such an approach risks producing well-regulated systems that fail to deliver measurable economic benefits.

In the Omani public sector, the study identifies partial adoption of governance frameworks, uneven digital maturity across agencies, and gaps in implementation as key barriers to direct economic impact. Governance is often present on paper but inconsistently applied in practice, limiting its ability to drive sustainability outcomes.

Governance and transformation must move together

Digital financial transformation acts as the bridge between IT governance and economic sustainability. Governance provides structure, oversight, and strategic direction, while digital transformation converts these capabilities into tangible financial results.

The empirical analysis confirms that IT governance significantly influences digital financial transformation, which in turn has a strong and statistically significant effect on economic sustainability performance. Without this mediating role, governance remains largely symbolic, and sustainability gains remain unrealized.

This finding reinforces two key theoretical perspectives underpinning the study. From a resource-based view, both IT governance and digital transformation function as strategic organizational resources. Governance ensures that technology assets are aligned and protected, while digital transformation enables those assets to generate efficiency and value. From a stakeholder perspective, effective governance and digital systems enhance transparency, accountability, and service quality, meeting the expectations of citizens, regulators, and policymakers.

For governments pursuing national digital strategies, the message is clear. Economic sustainability does not emerge from digitalization alone, nor from governance frameworks implemented in isolation. It results from the integration of both, where governance actively shapes transformation priorities and transformation delivers measurable economic outcomes.

The study outlines several practical implications for policymakers and public sector leaders. First, digital financial transformation must be embedded within governance systems rather than treated as a separate innovation agenda. Second, capacity building is critical. Institutions need skilled personnel who understand both governance principles and digital technologies to bridge the gap between policy and execution. Third, performance monitoring should focus on economic outcomes such as cost efficiency, operational resilience, and long-term financial stability, not just compliance indicators.

The research also highlights the importance of inter-agency coordination. Fragmented digital initiatives undermine sustainability by creating inefficiencies and duplication. Strong governance can address this challenge, but only if it is actively enforced and aligned with shared digital platforms and standards.

While the study focuses on Oman, its findings carry broader relevance for governments across the Gulf region and other emerging economies pursuing digital government reforms. Many face similar challenges: ambitious digital strategies, strong governance aspirations, and uneven implementation capacity. The evidence suggests that closing the gap between governance and transformation is essential for turning digital investment into sustainable economic performance.