In today's data-driven world, the role of finance and accounting departments extends beyond traditional accounting and financial reporting. They are increasingly tasked with managing and safeguarding vast amounts of data. Effective data governance is crucial for ensuring data integrity, compliance, and informed decision-making. Financial Executives International (“FEI”)’s Committee on Finance and Information Technology (“CFIT”) is a group of executives at the cross section of finance and technology who are exploring best practices around data governance. Members of this committee represent companies of a variety of sizes and industries. This article explores their viewpoints on best practices for data management policies, the structure of a data organization, and the critical importance of finance's role in data governance.
Best Practices for Data Management Policies
Across CFIT, the large majority of companies are either in process or have implemented a data management policy which focuses on some of the key areas below.
- Establish Clear Data Policies: Finance departments must create comprehensive data management policies that cover data collection, storage, usage, and disposal. These policies should define data ownership, access controls, and data quality standards. Clear guidelines ensure consistency and compliance across the organization.
- Data Quality Management: High-quality data is the foundation of effective decision-making. Implementing data quality management practices, such as regular data audits, validation, and cleansing processes, helps maintain the accuracy, completeness, and reliability of financial data.
- Data Privacy and Security: Finance departments handle sensitive information that must be protected against unauthorized access and breaches. Adopting robust data privacy and security measures, including encryption, access controls, and regular security assessments, is essential for safeguarding data assets.
- Data Lifecycle Management: Properly managing the data lifecycle—from creation to disposal—ensures data remains relevant and compliant. Policies should define retention periods, archiving procedures, and secure disposal methods for outdated or redundant data.
- Compliance and Regulatory Adherence: Finance departments must stay updated with evolving regulations and industry standards. Data management policies should incorporate compliance requirements to avoid legal penalties and maintain trust with stakeholders.
Structuring a Data Organization
The data policies mentioned above are mostly managed by a data governance organization, but some companies noted that these organizations are still new. Given this feedback, it may not be unusual for companies to still be formalizing these organizations, especially in smaller companies. Across organizations there were a few different structures that companies utilized depending on overall company goals and structure. About half of the companies, mostly large public multinational companies, have a Chief Data Officer who manages data strategy, policy development, enforcement, technology, and training. It was most common for companies to have a centralized data governance team, including representatives from finance, IT, and other key departments, which ensures a cohesive approach to data management. Some companies had their own data team within finance which didn’t report to an enterprise level organization.
Effective data governance requires collaboration across departments. Finance should work closely with IT, legal, and operations teams to align data strategies, share best practices, and address data challenges. Regular cross-functional meetings and workshops foster a culture of data-driven decision-making.
The Importance of Finance's Role in Data Governance
Despite the variety of approaches to structuring a data organization across CFIT companies, members all agree that it is crucial for finance to play a role in data management. Finance departments rely on accurate data for financial reporting, budgeting, and forecasting. By actively participating in data governance, finance professionals can ensure the accuracy and integrity of financial data, leading to more reliable and timely financial insights. Effective data governance helps mitigate risks related to data breaches, inaccuracies, and non-compliance. Data-driven decision-making is essential for strategic financial planning and analysis. High quality data enables finance leaders to identify trends, optimize resources, and drive business growth. These are just a few of the reasons that finance professionals should stay closely aligned with data management.
Conclusion
In the era of big data, finance departments play a critical role in data governance. By implementing best practices for data management policies and structuring a robust data organization, finance can ensure data integrity, compliance, and strategic decision-making. Embracing data governance not only enhances the efficiency and accuracy of financial operations but also positions finance as a key driver of business success in the digital age.