What's the return on investment from data governance? As the result of Coronavirus, demand for data governance is increasing, and this is all at a time where resources are scarce, which means now, more than ever, stakeholders need to see a return on their data governance investment.
The reason for this huge focus on data is simple: people want to be sure that the data they have and are working from is of good enough quality to make decisions about the future of their business and its survival.
Data governance is needed to provide a foundation for any and all data initiatives, projects, and data-driven decision making within your company. Like it or not, it’s the basis for better data analytics, data science, AI & machine learning, better understanding your customers, delivering better services/products, and increasing efficiency. It really is important.
However, as demand goes up, budgets are crashing through the floor. Every penny spent needs to be justified to stakeholders. So, we've got this conundrum... if we are going to deliver data governance, it has to deliver a return on investment (ROI). So, what exactly can you expect from implementing data governance within your organisation?
1. Reduce Data Redundancy
When there’s a lack of data governance, organizations have a higher chance of operating in silos. This occurs when departments or management groups do not share information, goals, tools, priorities and processes. And, as such, the same piece of data is stored in more than one system or more than one place in the same system.
Research has shown more than a third of data is obsolete or redundant, and therefore is known to be completely unusable. The gradual impact of redundant data is set to cost you both money and customers
In many instances this is unintentional because departments are unaware of the data practices and data needs of other departments. Other times this is done intentionally in order to meet different needs. In both cases, data governance offers the framework, policies and standardizes how to handle and manage these multiple versions of the same data, and at the same time reduce data redundancy where it doesn’t serve a specific business purpose.
Research from Experian Data Quality has also shown that the hidden costs of data redundancy could be more than 12% of lost revenue. And, a further 21% of businesses will experience damage to their reputation as a result of redundant data.
It’s also been discovered that more than half of the information stored by businesses is ‘dark’, which means it has no value to daily organizational operations and is just taking up space on your server.
2. Minimizing Security Risks
The cost of mismanaging data security can be very damaging to your organization. Both in terms of the actual cost and the damage to reputation.
In October 2020, the Office of the Comptroller of the Currency (OCC) fined Morgan Stanley $60 million for the investment bank's failure to properly oversee the decommissioning of several of its data centers in 2016, a move which the OCC said put customer data at risk of exposure.
The OCC stated Morgan Stanley did not properly manage the third-party company it has hired to carry out the work and ensure that all personal data was removed.
This shows just how fundamental data governance is to minimizing data security risks. So, while the data/information security discipline ensures that the organization’s data is safely guarded, data governance ensures that the right people and systems have the right access. It ensures organization-wide data accessibility in a controlled manner, among many other things.
3. Improving Data Quality
According to Gartner research, the average financial impact of poor data quality on organizations is nearly $10 million a year. IBM also recently discovered that in the US alone, businesses lose $3.1 trillion annually due to poor data quality.
Data governance can alleviate a large portion of this by helping the organisation create data quality standards that the data needs to adhere to in order to meet business requirements. Ownership and stewardship of the data are established through data governance and with time, a cultural change will take place where data quality will be seen as everyone’s responsibility.
Considering that almost everything relies on data, the cost of its quality trickles in every aspect of the business, from maintaining the same level of service to accurately making business decisions based on operational and forecasting reporting, analytical models, and AI interpretations.
Don’t miss an opportunity…
On October 7th, 2020, the Office of the Comptroller of the Currency has also hit Citibank with a $400 million fine for deficiencies in enterprise wide risk management, compliance risk management, data governance and internal controls.
The OCC is also requiring Citibank to obtain its approval "before making significant new acquisitions." And it says it may "implement additional business restrictions or require changes in senior management and the bank's board should the bank not make timely, sufficient progress in complying with the order."
If there’s ever been an ask for a strong business case of investing or not in data governance, then this is it. If you’re asked about the ROI for implementing data governance and you only have time for an elevator pitch, then mention this story.
Avoiding a $400M fine is a great example of the ROI for implementing data governance. If there was ever an example to make your business case and your pitch stronger for a reason why data governance should be implemented, then this is it.