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The CFO's role in big data

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  • Introduction

    There can be few CFOs today who are unaware of big data’s potential to transform their businesses. But in many companies, big data is still thought of as primarily an IT function issue. Big data has the potential to radically change the way business is done, and successful big data strategies are owned and driven by the management board. The CFO, in particular, has a crucial role to play. Here are just a few reasons why CFOs should be getting serious about big data:

    Big data - find out more

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    Big data – find out more. [See a transcript of this video]

  • Eight reasons to get serious about big data

    1. If you don’t, your competitors will leave you behind.

    Companies that don’t embrace the potential of big data for their business will not only fail to reap the benefits, they will be left behind by their competitors. Leading companies with sophisticated big data strategies achieve competitive advantage through big data, and it is fast becoming a necessity to survival.

    2. Big data can transform the way business decisions are made.

    Big data’s significant predictive power enables CFOs to make decisions based not on what happened last year, but based on what the data tells them is going to happen next year. It can also provide insights about customer or employee attitude or sentiment, that previously would only have been uncovered following a drop in sales or an increase in employee attrition rates.

    3. To realize big data’s potential, cultural and strategic change needs to be driven from the top.

    The most successful companies will be those that use data both to change the way they make business decisions and the way they do business. The CFO’s seat at the executive table enables them to advocate the strategic and cultural shifts necessary.

    4. Compliance creates value.

    Big data regulations are complex and vary across different jurisdictions. To avoid reputational and financial damage, and possible criminal penalties, CFOs must ensure there is a governance framework in place that ensures all big data activities are legally compliant. A rigorous approach to legal compliance is not only about risk mitigation – it will increasingly create value for the company by building trust and brand loyalty with customers.

    5. Big data can help CFOs become more future-focused.

    Big data will mean that business decision-making will increasingly be based on evidence-based predictions of future trends rather than observations of past events. The CFO role has been transformed in the last decade, and the focus has switched from controlling, measuring and budgeting to a far broader, strategic business leadership role. Big data has the potential to take this transformation one step further, by enabling CFOs to make business decisions based on the future, rather than the past.

    6. Big data will make the finance function more agile and responsive.

    For the last 30 years, finance processes have followed a cycle that has remained fundamentally unchanged. But the most sophisticated users of big data are already allowing it to disrupt their business cycle, and are adapting to changes to supply, demand, and the business environment. Big data can significantly increase the rigor around forecasting, and improve the way finance supports business decisions.

    7. CFOs are used to data-driven decision-making.

    The finance function has always had a responsibility for the collection and analysis of data, and has always been called upon to use its skills to guide business decision-making. This means that CFOs are ideally placed to identify data from across the business — and from both internal and external sources — that can be used to solve specific business issues.

    8. CFOs must guide big data efforts to make them effective.

    Big data’s value does not lie in its sheer volume, but in the specific business issues it can help to solve. With their financial insight into the whole business, CFOs are in a perfect position to identify the business problems that big data can help to address.

    For those CFOs who succeed, big data will offer opportunities:

    • To increase top line growth
    • To manage costs, and eliminate those that aren’t driving value creation
    • To improve efficiency by automating processes
    • To change business models to adapt to the changing business environment
    • To reduce risks
  • Focus on the legal aspects of big data

    Why CFOs need to focus on the legal aspects of big data

    Big data offers businesses huge opportunities to transform processes, identify opportunities and reduce risks. But the complex legal issues present serious financial and reputational risks that no CFO can afford to ignore.

    There are two key reasons why CFOs should focus on these legal aspects from the outset of any big data project:

    • Non-compliance can result in serious financial and reputational damage, or criminal penalties.
    • Protecting your data builds trust with customers, investors and ultimately the markets.

    Here are some steps that CFOs should take on big data compliance:

    Understand the scale of the issue.

    The potential penalties for the misuse or loss of data are rising; for example, the European Parliament has voted for fines of up to 5% of a company’s global revenues for data privacy breaches.

    Grasp the complexity of the legal landscape.

    To make the most of big data, companies must navigate an increasingly complex legal landscape, including issues relating to data privacy and protection, anti-trust, intellectual property and tax. It is a tricky area for companies as laws vary widely across jurisdictions, and new legislation is being regularly introduced to keep up with advances in the field.

    Get to grips with the business’s data management.

    The sheer scale of data collected by organizations represents a growing risk. Businesses that fail to keep track of what they hold or to check the accuracy of their data cannot guarantee they are complying with the law. CFOs must make sure that a defined framework for the collection and management of data is established and adhered to.

    Do not let the risks derail big data projects.

    Organizations that fall foul on big data may be subject to financial and criminal sanctions, as well as reputational damage. But the risks should not deter CFOs from pushing forward on big data projects. Rather it should encourage them to take steps to consider the key legal and ethical issues right from the start and throughout every big data project.

    Consider the legal implications from the start.

    To avoid serious risks to the success of an organization’s big data projects, compliance must be considered at the inception of the project — once the project is up and running and data has already been gathered, it may be too late.

    Use big data compliance to save time and money.

    Ensuring legal compliance, in the end, does not reduce the amount of insight that can be extracted from big data. It simply ensures that time and money are not wasted on activities that later have to be abandoned for legal reasons.

    Use good big data practice to build value.

    Compliance is not just a question of avoiding risks; it also provides a chance to add value. As stories about data privacy and data security increasingly feature in the media, those companies that can show that they have a rigorous and proactive approach to the legal and ethical side of big data will win trust in their brand.