The link between financial data and actual money made it clear early on that this data needed to be secured and protected. But it was not until data-driven approaches to business began producing huge and ongoing streams of financial data that it became apparent just how vulnerable this data really was.
Companies understand that data security is a paramount concern these days. But what is less widely acknowledged is that effective data management is equal to and deeply connected with effective data security. Financial data creates huge threats if it falls into the wrong hands. But there are consequences that are just as significant if the data is simply mismanaged.
They may not make front page headlines and send millions of clients/customers into a panic, but they can degrade a company’s fortunes just as consequentially. Here are a few examples that underscore why financial data must be managed as carefully as it is protected.
Regulations like Sarbanes-Oxley and PCI set strict standards for how financial data is managed. And if these standards are not met, it subjects companies to fines and fees as well as diminished public confidence. Given the volume of stored financial data that is now subject to these regulations (and many more), maintaining compliance is no small task.
Relatively minor mistakes and oversights can lead to major instances of non-compliance. And the companies who struggle to comply with today’s regulations will chafe under the stricter standards likely set by future regulations. Companies that do not make a major effort to manage data will always find themselves in conflict with the law.
The dark side of digitized financial data is that small clerical errors can multiply and spread throughout an organization more quickly and consequentially than ever before. And for the same reasons that regulatory compliance is getting harder, strict data oversight and governance is getting harder too. Completely eliminating data mistakes is a Sisyphean challenge, but with tools like ERP financial systems providing oversight and automation, human error becomes less likely to happen and easier to spot.
The scope of this problem was revealed in 2016 when an audit of the United States Army revealed $2.8 trillion in erroneous accounting adjustments made in just one quarter of 2015.
Financial data has tremendous value beyond simply balancing the books. It is also a huge strategics asset. When this data is integrated with insights from sales, marketing, manufacturing, and the C-Suite, it enables decision makers to plan and act according to information and insights rather than intuition. Financial data has historically been used for strategy, but when the available data set is outdated, incomplete, or irrelevant, it delivers limited insights. Without a comprehensive data management strategy in place, the full value of financial data is wasted. Not only does this squander opportunities, it puts companies at a distinct disadvantage when they compete against more data-driven, risk-conscious, opportunity-aware companies.
The point of this piece is not to make data seem even more overwhelming and at-risk than it already appears. Rather, the point is to highlight that financial data has value both internally and externally. And the companies that make the most effort to protect and leverage it put themselves in a powerful position to succeed.
As vulnerable as financial data may be, it is also an asset that provides deep and distinct value. Simply put, the financial data of company A is completely different than the financial data of company B. Whatever insights company A is able to generate give it a totally unique advantage. Disregarding financial data may be a risk, but managing it properly offers huge rewards.