Thursday 1st August 2019, 9:40am
As the volume of data escalates is it time to report the value of data as a business asset?
We all understand currency. We know that a £10 note is worth ten pounds because the Government tells us that we can use it to buy ten pounds’ worth of stuff.
But now there’s another potentially even more powerful kind of currency flying around. Data. Like money, data has value. Marriott Hotels and British Airways have both found that out the hard way. A recent data breach affecting half a million customers has just landed BA with an ICO fine of £184 million.
And yet, despite the huge downside risk of data and the obvious ability of the regulating authorities to attach a financial value to breaches, information still doesn’t routinely feature on the average company’s balance sheet as a value-bearing asset. The Federal Reserve Bank of Philadelphia estimates that U.S. companies hold more than $8 trillion in data and other intangible assets. Douglas Laney, analyst at technology research and consulting firm Gartner Inc, has described it as “flummoxing” that companies have better accounting for their office furniture than they do for their information.
The conversations about reporting data as an asset have been happening, but from an active accounting perspective there’s a puzzling absence of urgency. That’s especially odd against the background of a rapidly snowballing accumulation of business information. It’s not exactly thin on the ground in 2019. Over the next six years, that data is predicted to grow by a factor of ten – and Gartner predicts that the business world’s increasing dependence on information will lead to companies being valued on their information portfolios by 2022.
You can understand why companies are reluctant to grasp the data-valuing nettle. Some manpower and resource costs around data acquisition, build and storage are relatively easy to quantify, but how do you calculate the depreciation – or appreciation – of a piece of information? How do you weigh a data bit’s value to a company against its potential to attract a hacker’s interest, and as a consequence of that, its potential to generate hefty GDPR fines (currently set at €20 million or 4% of global revenue)? How do you apportion costs to data security and governance, to consent management and to the invisible but very real threat of reputational damage?
Beyond increasing company value, there are other genuine wins in putting data on the balance sheet, for example by exposing useless data that can then be purged from the system, the added incentive to reduce costs involved with storing and processing data and, of course, it raises the awareness of the value and importance of the data across the organization.
It is highly likely that accounting regulations will change at some point and a set of standards will emerge for determining data value and cost; an exercise that sounds about as easy as knitting fog. But getting up to speed now by deploying top-notch data governance and integrating data from across the business sounds like a bright first step for any progressive outfit interested in getting their house in order – and in getting a jump on the opposition.