Data belongs on the balance sheet, its importance will only grow

27 Apr 2018

  • Analytics
  • New thinking
  • Data

This article was orginally published on Which50.com 

As data becomes more important to the way organisations work,  business should expect their data assets will eventually make their way onto the balance sheet. That’s the view of the Institute of Analytics Professionals of Australia (IAPA) which which spend 2018 advocating for the move, according to a spokesperson.

Indeed data is already being used to value companies in acquisitions, as was the case for both Amazon with Twitch and Microsoft for Linkedin.

And there are already early examples of companies listing data as an asset – for instance, AT&T.

According to Annette Slunjski, General Manager at IAPA, “Data on the balance sheet as an asset will happen – we already spend time, budget and resources to mitigate risk and take responsibility, we should accept the positive impact of data too.“

IAPA’s view is that recognising data as having balance sheet value outside of intangibles – as an asset in its own right – will force companies to take responsibility to enhance, protect and improve data, “…and ensure they have an analytics team in place to translate the data into insights that will help navigate current and future business challenges.”

According to Slunjski, “Business needs to be ready to leverage data-driven disruption like data monetisation, artificial intelligence, IoT, robotics and biometrics.”

To navigate these disruptors, she said business needs to start from a position of recognised value and acknowledge the role of data in the financial success, innovation, and longevity of business.

“Data is an enabling asset and should appear on the balance sheet as much as a building, manufacturing plant, aeroplane or ore in the ground. The biggest challenge that companies have is how to value their data.”

Of course, it may not be that straightforward.

Gartner analyst Doug Laney, told Which-50  last year, “ Most companies have a better inventory of their office furniture than their information assets.”

Despite this Laney is a proponent of the idea. “Although it isn’t recognised in traditional accounting standards, “info savvy” organisations enjoy a market to book value that’s nearly two times higher than the market average. Valuation experts and equity analysts are starting to pay attention to company’s data and analytics capabilities.”

By 2021 Gartner believes the prevalence of equity analysts valuing organisations’ information portfolios in valuing businesses themselves will spark formal internal information valuation and auditing practices

For IAPA  thesis a key agenda item in 2018 Slunjski said, “and we’ll be working on guidance to help organisations to evaluate their data and ensure it is recognised as an asset.”

We asked Slunjski to tell us what kinds of steps do companies need to take if they are serious about treating data as an asset.

“Treating data as an asset starts with knowing exactly the scale and scope of the data via a data audit, ensuring proper governance procedures are in place so only those with appropriate authority can access the data, developing security protocols to guard against data breaches and hacking attempts and educating all staff on best-practice use and treatment of data. “

Additionally, Slunjski said, companies should invest in their analytics team who can translate data into valuable insights that solve business issues, relieve operational pain points and power customer experience initiatives.

“Part of IAPA’s role is to help organisations develop an analytics team with the right combination of technical and soft-skills to streamline the delivery of data-driven insights to business.”