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The Rising Cost of Data Compliance and Why Businesses Need to Pay It

Around the world, businesses and public agencies are increasingly adopting technology solutions to digitize their operations. With the advent of advanced communication technology such as 5G networks, an increasing number of sensors and devices must be employed to process the data produced by digital technologies and the organizations that use them. These parallel trends are resulting in more data being produced than ever before – data that not only contains useful insights but is also highly valuable for organizations.

But while much has been said about the growing amount of data produced as a result of digitization, there’s been relatively little discussion about the high barrier of entry organizations face when seeking to benefit from digitization – namely, the high cost of collecting and organizing data and making it available for use.

High Cost of Data Compliance

It’s a fact that for businesses, the cost of implementing and maintaining true data compliance is significant. One study produced by the Ponemon Institute found that for companies, the average cost to implement and maintain a robust data compliance regime can top $5.3 million US. As more and more data are generated by businesses -- requiring compiling, cleaning and organizing -- these costs are only growing.

The cost of non-compliance, however, can be staggering: the same study found that the average cost of non-compliance for companies has grown to $19.5 million CAD, more than two and a half times the cost of compliance.

Knowing this, it makes sense for businesses to ask not if they can afford to be compliant, but rather if they can afford not to be.

The Importance of Accurate Data

For trading partners, data compliance has long been understood to be critical to successful business relationships. For example, when a supplier sends product information (including product images, specifications and more) to a retail partner, that data must be sent in a way that is secure, reliable and complies to the retailer’s standard format. Data that is incomplete or contains errors requires manual intervention, increasing costs and slowing time-to-market.

In this way, supply chain collaborators have been quietly championing the necessity of data compliance for some time.

Aligning with Industry Standards

A major consideration when implementing data compliance is if the solution being used will ensure compliance across an entire industry, or only for one or two trading partners.

For example, a supplier may be updating their barcode system to meet partner compliance requirements. But rather than simply adhering to the standards proposed by a single partner, the supplier would do well to develop their barcode standard according to widely-adopted GS1 US standards, ensuring that their barcodes will be compliant with each and every organization that uses GS1 US.

The reality is that while ensuring compliance with industry standards and regulations is expensive, it must ultimately be embraced as part of the cost of doing business in the digital era. Businesses that become proactively compliant with current and anticipated data standards can reasonably be expected to lower their overall compliance costs when measured over the long-term; those who choose to adopt compliance measures too late, or ignore them completely, will ultimately pay the price of having a weak or nonexistent compliance program. Delays, chargebacks and data security issues lead to increased costs for businesses who do not address data compliance issues.

Technology for Data Validation

A proactive way to address data compliance issues is to use technology solutions that incorporate data validation as part of their normal operations. For example, some solution providers in the fields of Electronic Data Interchange (EDI) and electronic product catalog provide data validation services that ensure data being exchanged between trading partners, such as product data, is fully compliant with partner systems.

This proactive approach pays immediate and long-term dividends. Benefits generated by using technology that integrates data validation include:

Improved efficiency and better decision making. When businesses don’t need to double-check every document they send for data accuracy and compliance, they reduce delays and generate immediate time and resource savings. And when they make decisions based on data that has already been validated for accuracy, they can be sure the decisions they make are the right ones.

Fewer chargebacks and/or penalties. Clean, accurate data means no unpleasant surprises during data exchanges with valued trading partners. This leads to fewer chargebacks and penalties related to non-compliance, generating more savings.

Better communication with trading partners. In a global supply chain, trust and reliability are essential to developing strong relationships with trading partners. Using tools with built-in data validation make it easier to establish that trust by providing partners with a built-in guarantee for data accuracy, reducing friction and defusing compliance issues before they arise.

The Time for Data Compliance is Now

Moving forward, businesses will only become more reliant on data to inform decision making and reveal insights about their operations. Data will increasingly be used to validate partners, processes and products, and this paradigm ensures that data will continue to be viewed as a high-value commodity that must be gathered, polished, organized and validated for accuracy before it is shared outside an organization’s walls, much as gems and precious metals are today.

With this in mind, businesses must look ahead when deciding how to treat the data they generate today and commit to being stewards of that information, both now and in the future. Data compliance is no longer a vague concept that can be put on the back burner until the next fiscal year -- it is a critical element of any forward-thinking business strategy and should be treated as a priority.

Nathan Munn | InterTrade.com

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