How big data can bolster your company's risk management
By analyzing data points from consumers, employees, the economy, and more, companies can use the information to chart out possible risks in the future.Posted — Updated
In today's world, data is collected at mind-boggling rates. People of all ages and backgrounds are almost constantly interacting with technology, allowing access to their names, ages, locations, content preferences and more.
Using this "big data" effectively should be a key part of a company's risk management strategy, said Mark Beasley, accounting professor at North Carolina State University's Poole College of Management and director of the school's Enterprise Risk Management Initiative.
"When you think about managing a business from a risk perspective, you want a weather map to see what could be coming at it in the future. Managers are wishing they had better data to help them, but there could be a real opportunity to take advantage of analyzing all the data that companies have to do so," said Beasley. "They have consumer data, economic data, employee data, all kinds of data. We see it as a huge opportunity to leverage that data to create a sort of dashboard of risk metrics, to give you a bit of a heads-up, like a weather map."
To help meet the needs of the business world and make it easier for professionals to use data in this way, the Poole College of Management has created a master's of management program with a risk and analytics concentration. The graduate program is offered asynchronously online on a part-time basis, so students can participate from anywhere in the world.
With so much information available, the challenge is figuring out how to analyze and use it. After all, it may not be organized in a way that's easy to read or compare with other data sets.
"A lot of data is in text — it's unstructured," said Beasley. "A good example is reviews of a product. People are typing words about the restaurant they went to and what they thought about it. Or they say a product is hard to install or hard to operate. It's in sentences, not in a database like Excel."
That's why companies must learn about tools, such as Python or R programming languages, which analyze unstructured data.
"We can analyze customer reviews of a product and that software can pick up sentiment analysis," said Beasley. "It would be helpful to know people are really complaining about our product or see how we can provide a better service."
Big data can also warn companies about risks coming down the line, said Stuart Horn, director of enterprise risk management at IBM in New York.
"We have a big global footprint of locations where we do business and where we have development centers, manufacturing centers and suppliers," said Horn. "In our tool, we have mapped out all of our suppliers, all of our key locations, what kind of parts we're getting from there, the work we're doing there and so on. This tool also looks at what's happening in geopolitics, riots, earthquakes, fires and more. It looks at where potential events are coming and maps with locations that are important to us."
Additionally, data analysis doesn't just alert a company to potential problems — it helps with continuity and the supply chain, said Horn.
"In the old days, you would have been in complete reaction mode," said Horn. "So, using data, being able to leverage it, aggregate it, make sense of it and then apply it in a smart way so you get what is actually pertinent to you, is really what's at the core of using big data for risk management."
The volume of data that needs to be analyzed requires powerful servers, so companies without room for them can rent space from a cloud-computing provider, said Beasley. That way, they won't miss out on valuable information.
"The companies that are leveraging big data, analytics and artificial intelligence are the ones that are better at managing risks and getting better performance," said Horn. "If you're at the forefront of technology, you're doing better than your peers and you're getting ahead."
Copyright 2023 by Capitol Broadcasting Company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.