Insights & Ideas

Why you can’t live without data governance

Well, this may not be the most exciting topic but it’s extremely important if you don’t want to get fined by the UK government. That’s right. Data governance could become your ‘get out of jail free’ card if regulators think you have breached the General Data Protection Regulation.

That’s just one example of why data governance should matter to you. 

Let’s dive into this a bit further, including why the success of your procurement function is reliant on data governance and what you should be doing to ensure you’re creating maximum value from your organization’s data – which, hopefully, is a priority especially if you’re investing in transforming your procurement function into a leading light.

Let’s first look at what we mean by data governance. Data governance is how your organization, with clearly defined roles and responsibilities, manages data - using defined methodologies and processes for assessing and improving the quality of data that fuels your procurement processes, capabilities and systems. 

A lack of clear data governance results in poor quality data, which inhibits the adoption of new technologies that procurement professionals require to evolve their organizations so it’s fit for the future.  The lack of trusted data also leads to less than optimum procurement decisions in the U.S. (68%) and the EMEA region (62%), according to research conducted by North Carolina State’s Supply Chain Resource Cooperative (SCIC).

Why do procurement leaders lack confidence in their decisions?  The same SCIC survey revealed that only 20% of procurement organizations have implemented a “Data Governance” program. This is undoubtedly holding back the profession.  

As procurement organizations increasingly seek to collect and use more data in different formats (i.e. internal / external, structured / unstructured), data governance will also become increasingly critical to core business objectives such as improving cost savings, cash flow, risk mitigation and compliance.

When data governance is properly deployed, the value to the business can be massive. In one instance, harnessing master data management enabled a pharmaceutical company to save $98 million by improving their spend visibility.

Let’s now look at a few examples of how data governance can be deployed in your procurement organization:

Spend analytics: Data governance provides you with accurate visibility of your suppliers.  You can accomplish this end goal by defining how your organization classifies suppliers and the products and services they provide your company in a standardised company-wide taxonomy. With new levels of visibility, you’ll quickly be able to identify savings opportunities and potential risks throughout your supply chain.

Contract management: Improving cash flow and compliance will be drastically improved by using data governance to manage your contacts and, specifically, knowing when your organization is due a rebate.  It’s important that you have access to vendor contacts that specify the negotiated T&Cs under which your organization is owed money as a result of achieving pre-set targets such as a spend threshold.

P2P: A lack of data governance in your purchase-to-pay process can quickly lead to a high number of duplicate payments.  Your data governance program will improve the quality and accuracy of your vendor master file, which will result in shortening processing times and cost.

[If you’re planning a P2P roll-out, it’s recommended that you first focus on improving the quality of your data. My colleague, Charlie Clark, has written about how to de-risk your P2P deployment here.]

What does data governance look like in your organization?  Here are five questions that you should ask yourself:

  • Who is responsible for data governance in your organization?
  • Are you able to audit changes in your data, including by whom and when?
  • Does your organization have metrics for assessing the improvement in data quality?
  • Who is responsible for maintaining your vendor master file?
  • Does your organization have a standardized spend taxonomy?

If you answered “I don’t know” to several of these questions you may have a data governance problem that could bite you in the backside when you least expect it. 

Fortunately, there are several things you can do about it. Data governance requires investing in your people, tools and processes. In doing so, you’ll establish a sound foundation for your procurement organization’s information requirements – empowering you to deliver valuable services (faster) across your company.   

Here are a few suggestions to improving your data governance and decision-making capabilities:

  • Establish a company-wide data governance committee to define your organisation’s data governance strategy
  • Assess what processes, tools and capabilities you require to develop a data governance program in order to comply with internal and external compliance obligations such as GDPR
  • Use a technology platform that will support your organization’s ability to store and manage data, such as providing an auditable record of all changes to data, and automated workflows that inform colleagues of what action they should take from the data
  • Leverage analytics to monitor the success of your data governance program, including key performance indicators that track improvements in data and compliance to defined data governance and master data management processes 

Last but not least, download our “Spend Data Governance and Value Framework,” which will guide your work on improving the quality of your data to support your business objectives.

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