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Investing in data governance is key to safeguarding reputation, avoiding costly mistakes – and securing a competitive edge.
In brief
- Legacy systems and inconsistent practices across business units often result in a lack of transparency on data within an organization
- Business leaders should establish good data governance to extract the value from data – and protect the organization from data risks
- We propose five phases on the transformation journey toward being a data-driven organization
In our tech-driven world, data has become the most important asset for companies. Managed well, data oils the business engine, facilitating the improvement of processes, providing a sound basis for reporting and insights, as well as enabling complex automation.
Without an accurate, up-to-date data foundation, key performance indicators are unreliable and the cascade of potentially negative effects can be hard to predict. Despite its important role, data governance is all too often neglected. Business leaders can struggle to ensure that data is standard and consistent across business units, especially if they have inherited a patchwork of legacy systems as a result of e.g., mergers and acquisitions, siloed operations. A lack of integration across platforms and applications is a major source of resource inefficiency – and potential error – as time and effort is spent manually transferring and reconciling data sets.
Against this background, organizations may have a limited understanding of where their data comes from and how they can efficiently protect and use it. The situation is compounded by the complex data protection landscape, which continues to grow as new regulations enter into force. Poorly managed data can make it difficult to track personally identifiable information, potentially leading to gaps in – or outright breaches of – data privacy. Some legislation, like the EU General Data Protection Regulation (GDPR), is associated with hefty financial implications in the event of non-compliance, which can lead to fines of around EUR 20m or 4% of a company’s annual turnover.
The case studies above show what can happen when data management and governance is ignored. But there are other good reasons why data governance belongs on the board agenda. Data quality issues and misalignment can create rework, cause miscommunication and impact decision making. People are sometimes surprised to learn that even large, publicly listed companies have these issues with their data, despite elaborate IT setups. The problem is often a lack of transparency, which contributes to silo thinking as data tells a different story in each department or unit of an organization. Without a common understanding of data and shared terminology, you inevitably end up getting wires crossed somewhere along the way.
Without a solid data foundation, organizations risk falling even further behind their data-savvy peers.
Failure to practice good data hygiene is emerging as a competitive disadvantage, while good data governance gives organizations an edge. In the absence of data governance, companies miss out on the benefits of consistent, clean data across the organization. Data quality issues impact business leaders’ ability to make decisions and leave them vulnerable to financial and reputational penalties resulting from data gaps. What’s more, leading organizations are already embracing data analytics and artificial intelligence to drive business growth and evolve the business model. Without a solid data foundation, organizations are badly placed to do this and risk falling even further behind their data-savvy peers.
Understandably, companies are keen to embrace better data governance. This desire to change is a good start, but it’s important to acknowledge that there is no quick fix to issues that have been accumulating in the infrastructure for decades. Data governance is not about finding “the” technical solution, but about embarking upon a transformation project that spans organizational, process and technology changes. Given the scale and reach of a company-wide data governance policy, it’s important to have strong executive sponsorship. Decision-makers often seek hard facts about the expected return on investment (RoI), especially when the spend is significant. This can be assured by connecting the objectives of the data governance program to the organization’s strategic goals, e.g., customer satisfaction, market agility, competitive positioning and increased revenue.
A broader view also reveals the potential gains of good data governance. Reliable data and powerful AI “on top” can support a company by providing the basis for strategic, evidence-based decisions – but only if you have large volumes of accurate, trustworthy data. It’s this combination that makes data valuable.
With executive buy-in established, it’s time to start your transformation journey covering organizational, process and technological changes. Although individual work streams will vary depending on the nature and needs of the organization, there are five key phases to consider:
For companies still wondering whether their data governance needs polishing, a couple of questions can help clarify the need for action:
- Do you ever have inconsistent data and reporting across systems and geographies?
- Do you make use of data when making strategic business decisions, i.e., are you a data-driven organization?
- Is data owned and accessible by the right roles within the organizations, and protected elsewhere?
- Are the financial figures you report on completely relevant, useful and accurate?
We believe that data governance is the prerequisite for becoming a truly data-driven organization. EY can help you start your journey today.
Summary
In today’s tech-driven world, data is the new gold. Strong data governance is essential if organizations are to extract the value from this precious asset – and prevent it from becoming a risk. Establishing good governance is not a task but a transformation that requires executive sponsorship at each stage of the journey.
Acknowledgment
We thank Alexandru Bortnic and Oliver Mohajeri for their valuable contributions to this article.