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Data: A New Line Item on Balance Sheet?

A New Line Item on Balance Sheet

Is that a preposterous notion?  May be, not entirely…let’s consider this situation.  Consider your organization or may be one of your customer’s.  If you could, for argument’s sake, withhold the password of every single individual of that organization for just one hour, what would be the dollar equivalent of business lost – in new business, existing customer support, partner opportunities, average employee productivity, executive decisions, supplier relationships, and anything else that goes on as part of everyday business?  So in turn, shouldn’t we think of data in monetary terms as connected with every password that we carry with us for enterprise access?  And the penalty that we pay, in monetary amount, when misplace it? Or, worse, you get hacked and data stolen as a result?

Data Same As Physical Assets?

If you consider physical inventory items or tangible assets that we can either count or measure, we can usually ascribe values to them, in monetary terms.  Many of them have expiration dates and usage specified based on scope and context.  The value, in dollar term, sometimes could be driven up by a number of factors: scarcity of these assets, uniqueness of their applications including durability, time/money/life saved as a result, cost of replacement, risk associated with erroneous applications, additional human expertise required to handle them, or any combination of these factors.  When we misplace or damage one of these tangible items, we usually calculate replacement cost based on condition and availability.  It becomes a cost item on our balance sheet.  So what about data?  Shouldn’t the same think apply to data as well?

If you are wondering whether data is tangible or intangible and as such more conceptual than factual to have a value, think about benefits of possessing right data – clean, safe, and connected – always.  More importantly, think about consequences of possessing bad data or no data at a time where critical decisions depend on it.  If the wins and losses are factual and can be measured as time saved, money made, or cost reduced, then shouldn’t some credit flow back to the source?  To the data components that have driven these outcomes in the first place?

Time to Treat Data as Equity?

Consider the European Commission’s evaluation and risk assessment of Facebook’s takeover of messaging service WhatsApp.  Regulators considered that much control on personal data might unduly impact competition and consumer choice.  Facebook paid $19B, valuing WhatsApp at $42.22 per customer record.  That’s some measure of value, at a record level!  Measuring data in ever-expanding vocabulary of units, from petabytes and exabytes to yottabytes and shilentnobytes, provides us with the impression that we now have all the data in the world in our possession.  But none of that goes anywhere closer to denote what happens even one byte of that data is lost, stolen, hacked?

While it’s expected that here will be obstacles to correct data valuation and valuation approaches, especially in the absence of established standards, any formula, or a single measure for equity in other forms, such as brand equity.  While businesses have invested billions in building brand identity and equity, there is still no agreed GAAP or industry accepted valuation for such.  So, how should we measure data equity?  Should we consider this as a line item for GAAP reporting purposes, especially identifying sensitive and security-risk prone data?   In your organization, if you’re trying to protect your data, are you properly insured against potential harm in the future?  How would you rate yourself?