Data Scientist Dr. Farouk Abdullah thinks Board Audit Committees must focus on data for better organisational sustainability and competency.
by Majella Gomes
We live in an age of disruption, where business models are increasingly reliant on data and large volumes of data are available to anyone who can harvest it, supported by innovation and technologies. Consider this: today’s smartphone has the same computing power equivalent to that of the whole US government in 1983. When companies apply advanced analytics techniques to harvest and interpret data, they can hone and develop a game-changing competitive edge.
Speaking to Board Audit Committees on how to manage disruption and data at MIA’s recent annual Audit Committee Conference 2018 in conjunction with the Institute of Internal Auditors Malaysia (IIAM), Dr. Farouk Abdullah, Chief Data Scientist, Azendian Solutions said that the first principle is “to recognise the indicators of disruption and identify the impact of such disruption on your organisation.” As an example, self-driving cars are now licensed in six US states and they have been found to be relatively more accident-free than human-driven vehicles. This could mean that in the future, driving licences may no longer be necessary, and there will be fewer deaths on the road. This disruption in turn will impact on the automotive and insurance industries. Understanding the causes and effects of such disruption will help auto and insurance businesses plan for the future and strategise how to manage the effects of disruption.
Dr. Farouk also said that disruption does not have to be a big bang event. “There is no major disruption. Rather, it is a set of small events that build up to a major disruption.” By noting minor trends which coalesce into larger seismic movements and having a finger on the pulse of the environment, businesses can move from being reactionary to taking prepared, proactive and preventive measures that will enhance their sustainability and longevity.
DATA IS KING
Key to identifying and managing disruption is data. Data-driven businesses are business that remain competitive by leveraging data and analytics. Citing Airbnb, Alipay, Google, Grab and Waze as some examples of organisations that focus on data and analytics, he said that these were de facto data companies whose services were secondary. Their main aim was to collect data and apply it towards generating insights that drive business growth. Every time a user logs in or switches an app on, data is being recorded, stored and analysed to develop functionalities to generate revenue. It’s quick, cheap and barely noticeable. Ride-hailing apps, for instance, are an accurate record of where the user is, and where he/she is going to. This sort of data can be very valuable for marketing to specific users through understanding their profiles and characteristics.
If organisations are now more reliant on data, Boards and Audit Committees too must change to reflect this new paradigm. Traditionally, the Audit Committee oversees the financial reporting and disclosure process, monitors accounting policies and principles, oversees the hiring, performance and independence of external auditors, regulatory compliance, ethics and whistleblower hotlines, and monitors internal control processes, analyses risk management policies and practices with management. But they no longer have the luxury of focusing so diligently on compliance and forensics, and should instead switch to the preventive and proactive to cope with disruption and enhance governance. “Businesses should move from just identifying issues after a disruptive event, to diagnosing how it (and subsequent events) should be managed, to predicting future possible occurrences and preventing these from happening. Speed and time are of the essence when dealing with disruption,” stressed Dr. Farouk.
TIPS FOR MANAGING DATA
Since data is now the lifeblood of companies, how can Boards and specifically Board Audit Committees help their organisations? Dr. Farouk recommends that organisations and Boards should:
- Have a data management/analytics strategy
- Have people who specialise in this
- Capture the right data
- Take care of assets; know where they are and how they are being used
- Use data in everything that is done, and transform their respective organisations to focus on data to drive the business.