Maximizing data assets through ethics
According to the Australian Accountants standards board an asset is defined as future economic benefits controlled by the entity as a result of past transactions or other past events. … (a) it is probable that the future economic benefits embodied in the asset will eventuate; and Page 4–4 — (b) the asset possesses a cost or other value that can be measured reliably.” The emergence of data as an entity that pretty much touches all aspects of our lives has seen terms such Data Assets slowly seep into the business vernacular. Much like a manufacturing plant, data has the potential for future economic benefits. Manufacturing plants are also often funded through debt or some form of equity and is result of a past transaction or event. This makes it easier to measure. How do we measure the value of a data asset? Is the other side of the accounting equation debt or equity? According to the CPA Journal “it continues to be challenging to value intangible assets such as data for financial reporting purposes, most recognize the importance of data itself. Many, if not most, accountants continue to appreciate the fact that data reflects the characteristics of a financially reportable asset because it has a probable future economic benefit.” The reason for this is that risk associated with the use of data, storage and reliability of data make it hard to measure. Data Ethics has a significant role in addressing these issues as I believe having a strong ethics framework will not only assist in mitigating some of the risks in measuring the value of data but fortify future economic benefits.
Data and to a greater extent information has become perhaps the most valuable asset businesses currently hold. Whether it be using data to provide customers greater value by better understanding their needs, providing unprecedented levels of convenience, greater connectivity and access to tools to improve wellbeing. Data has also assisted organizations to more effectively and efficiently manage their resources whether it be through supply chain or reducing waste. However, therein lies the paradox; how do corporations continue to enhance value to customers without impinging on their rights. How do we protect the right of individuals yet not become too rigid and cumbersome? According to Luciano Floridi in his article What is data ethics? “data ethics can be defined as the branch of ethics that studies and evaluates moral problems related to data (including generation, recording, curation, processing, dissemination, sharing and use), algorithms (including artificial intelligence..) and corresponding practices, in order to formulate and support morally good solutions.” There is an argument that organization’s should manage data assets like you would any other asset. Why not maintain a data asset register like you would a register for all your physical assets? According to the CPA journal “Measuring or valuing data should start with preparing an inventory register of all the organization’s data, including but not limited to the location, and prioritizing the data by how it aligns with the goals of the organization. Not all data stored by the organization is needed, and it should consider discarding data that is not so aligned.” Another critical area is how an organization is structured to manage data. Having a siloed approach whereby, departments act in their own best interest is a recipe for disaster. A centralized source reduces the risk of poor data quality which leads to lack of trust, multiple sources of data, failings in data governance and lack of accountability. A comprehensive data governance framework is not only critical in ensuring a level of trust but to identify the source of potential data breaches in a timely manner.
Following on, the notion Data equity, not to be confused with the accounting term, is a concept that refers to the collection, interpretation and distribution of data in an equitable manner, one without bias and borne out of preconceptions. Only with data equity can you maximize the future economic benefits. A key plank is the need for data equity to be addressed in the data life cycle. An organization called We all Count published the following seven stages:
- Funding — where are the sources of funding coming from as this has the potential to create bias. Need to be right AND fair is a critical foundation of any project
- Motivation — the importance of understanding hidden agendas
- Project Design — To avoid project design choices based on comfort, limits of understanding and Training
- Data Collection and Sourcing — approach collection with unbiased representation of the goal
- Analysis — analysis that is objective and free from bias
- Interpretation — consider data from a variety of perspectives — social, cultural, mathematical, historical
- Communication and Distribution — consider alternative perspectives. The balance of assertiveness and transparent uncertainty
A data asset clearly has different characteristics to a manufacturing plant. For one it’s not something tangible, it isn’t funded by a loan from the bank or the issuing of shares. Its sourced from equity of a different kind; information and often of a personal nature. It’s not like your run of mill asset where the impact of an organization not exercising its fiduciary duty in managing an asset, is purely financial. The impact can be more widespread and be fatal for the ability of the asset to provide future economic benefits. The most glaring example being Cambridge Analytica which ceased to exist in 2018 following the scandal in which it was accused of acquiring and using personal data about Facebook users to influence the American elections. According to Luciano Floridi in his article What is data ethics? “Social acceptability or, even better, social preferability must be the guiding principles for any data science project with even a remote impact on human life, to ensure that opportunities will not be missed.” For companies managing data assets or leveraging data, having a strong ethical framework is not a matter of being good Corporate Citizen or having a moral compass it effects the ability to be a going concern.
