A myth is being perpetuated in financial services. It’s delivered along the lines of "the more data you have, the less risk you face." It would be closer to the truth to reframe this as "the better your data management strategy, the less risk you face."
The truth is that many data strategies are not supporting more innovative approaches to risk management. Where businesses should be receiving early warnings about at-risk assets or the security of global headquarters, no such signals are available. A profound part of the problem is that organizations still struggle to extract the information that really matters from the billions of bytes generated within, across, and outside their walls. In turn, they’re often failing to deliver consistent, meaningful outcomes from the investment they are making in data strategy and digital transformation.
Leadership teams will increasingly find themselves asking how they can enable organizations to thrive while mitigating against the increasingly complex and multifaceted nature of risk. It turns out that simply adding more data isn’t the answer. Rather, it is identifying the most relevant data at the right moment—and using that information to decide and act with confidence.
Gartner has identified: “Many companies continue to struggle under the weight of traditional business models and analog business process that discount the potential of data and analytics. Others recognize their potential but cannot make the cultural shift or commit to the information management and advanced analytics skills and technology investments necessary to realize that potential.”
The burden is on leaders to improve decision making
The buck will always stop with the senior leadership team, and in a data-centric world, there must be a connection between effective decision-making and the timeliness and quality of data.
Yet, as companies amass vast volumes of data, they are not building the bridge between business strategy and data strategy. As Gartner has noted, "While 82% of CEOs have confirmed their organization has a digital transformation program underway, in many cases this is accompanied by a lack of business model change penetration." In other words, the strategy looks good in a planning deck but isn’t consistently reaping meaningful benefits.
While focusing data strategy on corporate risk, boardrooms will also have to address the rising importance of public data. Over the last decade, critical information about economic, regulatory and reputational issues have been breaking in public forums rather than only through closed or proprietary channels. Senior leaders who don’t prioritize public data prominently and early enough in their workflows will be on the back foot when it comes to identifying and mitigating risk.
“Many businesses are struggling to cope with the exponential increases in the data they now gather along with the ever increasing burden of regulations and compliance. Simply storing, managing, accessing and safely maintaining data as the law requires is a major challenge. This means that the cost of turning data into intelligence is becoming a hindrance to business agility for many, as is the need for high quality data analytics to prove compliance in a more complex and tightly regulated market.” - PricewaterhouseCoopers
Public data enables decision making
Public data—the billions of bytes of data created by social media and blogs, by ships, cars, trucks, aircraft and trains, by weather sensors and IoT sensors in smart cities, and a multitude of digital sources—is now critical to minimizing risk. The earliest market, operational and security signals are often buried within these data sources, and there is a clear relationship between the early identification of risk and improved decision-making.
Today, most organizations don’t have the systems to surface signals—but artificial intelligence is changing this. AI-based systems that analyze public data are now able to provide pattern recognition at scale and speed. And by spanning languages, formats, cultures and borders, such systems can deliver timely and relevant pieces of information from around the globe to greatly aid decision-making and inform a response. Whether it’s a trade embargo flagged by a journalist tweeting from another country, or an early alert on a disruptive weather event, public data can deliver early signals on incidents that have the potential to affect operations and even move markets.
Armed with this knowledge, businesses have access to critical information before the market shifts direction, or the blizzard hits their headquarters. Public data is helping to drive more effective decision-making, and can significantly redefine the way financial services organizations approach corporate risk.