Data is and continues to be a game changer for organizations across the world. Data science is evolving at an incredible pace, providing opportunities for companies to develop new, or enhance existing, products and services, and streamline operations and employee experience. Unfortunately, breaches and abuses are occurring with alarming frequency, impacting people in very real ways, driving legislators to enact complicated regulations in an attempt to create boundaries.
The use of data—and related risks—are so significant for many companies that, increasingly, boards are taking an active role in understanding how data is being managed. Many boards, however, find themselves unsure of how to evaluate the plans presented to them, which may keep them from engaging in meaningful discussions with management. This is exacerbated when events like COVID-19 occur, which impact operations and, by extension, how data risk is managed.
The following questions are intended to raise awareness among board members around issues and opportunities related to data, so they can better discharge their duties to the companies they oversee.
Depending on the industry, companies are finding exciting ways to take advantage of the innovations in data science. Three revolutions are taking place simultaneously:
Organizations continue to find innovative ways to leverage data to achieve objectives, and in the business world, companies are racing to leverage data to create a competitive edge. The opportunities range from:
As with embracing every new technology, there are risks that can impact the outcome, ranging from the mundane to catastrophic. Generally speaking, these include the following categories:
Cyber risks are an important component of data risks, generally focused on outsiders gaining unauthorized access to, or stealing, data. These briefings usually don’t dig into the nature of the data itself, which would reveal whether data is being improperly processed or handled, or other inherent risks tied to the use of data.
Unlike cyber risks, data compliance risks focus on whether the use of data violates regulations, policy or contractual obligations. These risks are increasingly prominent, as organizations leverage employee or customer information, or data licensed from third parties, such as clients, data brokers or governments. The impact and consequences of these risks can be significant, since violating some regulations can result in fines of up 4% of annual revenues.
Companies should develop and implement data governance programs that include data stewardship, leadership (such as a chief data officer), connections to business leaders (to help steer the program), objectives, strategies, plans and tactics, as well as accountability and ethics. Initiatives should be managed like any other significant project and should be tracked to ensure the organization achieves a return on their investment.
Boards should understand how management views data, from the perspective of both opportunity and risk. Is management assessing the transformative potential data has to benefit the company? Is management taking a balanced and measured approach to a data program, with qualified leaders, realistic expectations, proper investment and balance against risk?
Data has been called a new natural resource. While it’s not strictly accurate (it’s not new, and “natural resource” implies it’s fungible—which it isn’t), it is true that now companies can—and should—use data in ways never before possible to drive benefit, and should do so in full consideration of risk and obligations. Boards should ensure they have the right knowledge and resources at their disposal to engage management in ongoing thoughtful discussions, and this may include seeking outside advice as they get up to speed on the issue.
The future is going to look very different than today, and data is a catalyst to get there. Markets will reward companies that get it right.
James Howard retired as a Partner at KPMG, where he served as the Chief Data & Privacy Officer. He is currently an independent advisor, speaker and published author. Contact Mr. Howard and learn more at jhoward.us.