Season 1 Episode 5
In this episode, CJ Anderson begins at the beginning by talking about what a critical data asset is.
She shares some definitions and synonyms and explains what critical data assets are, what they’re for, why it’s essential to have them. By the end of this episode, you will be confident about why it doesn’t matter what you call them and how you can figure out the critical data assets for your firm.
Law Firm Data Governance Podcast
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Welcome to the law firm Data Governance Podcast, the Data Governance Companion for law firm leaders who want to know more about implementing and improving data governance. Each week I’ll share a new episode that talks about something to help you with your law firm’s data governance initiative.
This is Season 1, Episode 5. In this episode of begin at the beginning, I’ll talk about what a critical data asset is. I’ll share some definitions and synonyms and explain what they are, what they are for, why it’s essential to have critical data assets.
By the end of this episode, you’ll be confident about why it doesn’t matter what you call them, and also know how you can figure out the critical data assets for your firm.
Let’s start by figuring out what is a critical data asset? This is another topic with loads and loads of definitions on the Internet. Most of these are confusing unless you’re a real data guru.
It doesn’t help that critical data assets are often referred to as CDAs, or KDEs; ‘Key Data Elements’, or CDEs; ‘Critical Data Elements’. It doesn’t matter what you call them, like everything else in business or in life, call them by the name that means something to you, but more importantly to your stakeholders.
I use a couple of short definitions for critical data assets, both mean the same thing, but they’re worded differently for different stakeholders.
The first definition is that critical data assets are the bits of data which are important to your firm’s business operations.
So, to the decision making, your client needs, and your regulatory and compliance demands. The second definition is that a critical data asset is a piece of data that would compromise or damage the firm’s reputation or P&L, if lost, stolen, or otherwise compromised.
What then is the benefit of critical data? Well, that depends on whether you’re a glass half full or a glass half empty kind of person.
If you’re a glass half empty person, you could say that critical data must be managed to prevent disruption to the firm’s business and loss of revenue.
If you’re more a glass half full person, you can say that proper governance of critical data can maximise revenue, maximise customer satisfaction, and improve operational cost efficiency.
Of course, both of these are true.
Those definitions tell us that the firm needs to manage data as an asset.
But what does managing data as an asset mean? Data should be viewed as an economic asset, something that can help a firm improve its operations, increase its revenue, improve its client relationships, and to develop and produce new revenue streams.
Data can also enhance the quality of services, it can establish competitive differentiation, it can allow innovation and it can help reduce risks.
It’s worth noting at this point that a body of data, a group of data, a set of data, a bucket of data, or whatever you want to call it is a comprehensive asset, so think of it like Time Keeper data or CRM data.
In other words, it’s not just the individual data points themselves that are valuable.
The reporting, the analytics, the insight, the value gained from people having access to that data are all part of its overall value.
To treat data as an asset, you need to be prepared to manage, monitor, and control it like you would every other investment in the firm.
Like the firms, buildings, its people, its knowledge and its money.
All large firms, and small firms I’m sure, hold comprehensive registers of other more tangible assets, such as human capital, its people, financial resources, its income, it’s outgoings, it’s cash in hand and its premises, its buildings, things it owns, things it rents.
For data to be managed as a strategic asset to the firm, there needs to be a register of what critical data is held;
Where it’s held, what purpose it’s held for, and who’s involved with it.
This doesn’t have to be a ‘whizzy’ piece of technology, it can be a simple list, a 4 column spreadsheet, whatever you’ve got to hand can do the job.
The biggest hurdle to managing data as an asset is the lack of a way to include data on the firm’s balance sheet.
Using the balance sheet would send a strong signal to the firm about the value and importance of the critical data assets.
But unfortunately, international accounting standards haven’t caught up yet, so there’s no way to include data as an asset class in the firm’s accounts.
Some firms are putting monetary value on their data so that partners and business services leaders can understand the value of their critical data assets.
A widely seen figure in the press online is that data can represent about 20% of the firm’s total value.
It would be really hard not to invest in managing an asset that’s 1/5 of the firms value.
Data, then, is one of the most critical assets a firm can have because it’s unique in its detail and context.
Used strategically it can help ensure that a firm remains relevant and viable.
Why do we need to pay attention to the data management lifecycle for these critical data assets? Suppose you want to fully support business stakeholders with readily available, actionable business intelligence?
You want to help them understand the past, anticipate the future, and make informed business decisions to keep ahead of the market.
You need current relevant quality data. You need to manage your data correctly.
In complex organisations like law firms, technologies, processes and people depend on each other for success.
The best practice is to develop a framework for shared understanding to support upstream and downstream dependencies.
Most people in the firm will only see data as a specific phase of the life cycle, when the data is relevant to the task at hand.
They need to trust the information they see and participate in the data management lifecycle to ensure that they are looking at quality data.
As we’ve talked about, in addition to operational considerations, the increased data requirements relating to regulatory compliance and reporting put a burden on law firms to understand where their data is, where it goes and who uses it.
Data governance is the practice of identifying important data, critical data, your critical data assets if you will, across a firm, ensuring that that data is of high quality and improving its value to the business.
You can’t govern everything, and nor should you want to.
Your focus should be on those critical data assets.
The data essential for your firm’s client and operational success.
The data you need to retain for regulatory purposes.
Knowing your critical data gives your data governance effort clear parameters to work within.
It makes it easier to identify stakeholders and to effect change.
If you want to get a list together, just start with all of the data points in partner or client reports.
I bet that takes you 75% of the way to identifying those critical data assets for your firm.
You’ll find more in the cross-functional processes too. Which data goes from…
The HR system to the finance system, from the finance system to the marketing systems?
Once you have that list, you can start to think about things like which are the most and least valuable data assets, the most valuable being your critical data assets.
What do you want to achieve with them?
How are you going to do that? How do you know you’re on track with reaching that achievement?
How are you responding to changes in use, or requirements for that data? How do you get the best return on investment out of that critical data asset?
Identifying and managing critical data assets; the data most important to make your firm operate well can help you to improve your services, increase your client satisfaction, improve your client relationships, operate more efficiently, maximise profitability.
Despite the jargon, it’s just a list, and you can find most of them in partner or client reports.
If you have questions about critical data assets or data governance in general, head over to IronCarrot.com and use the contact form to get in touch.
I’d love to include the answers to your questions in future episodes.
And speaking of future episodes, in the next episode, we’ll begin at the beginning with figuring out what an Issues Log is.