Data is an asset but how do you value it?
The shipping industry seems to be finally coming round to the idea that data is an asset. Every operator I’ve spoken to in the last year has some sort of data related project going on, from fuel monitoring, to crew health tracking there are reams of data being collected on every facet of operations. As business models and processes begin to shift to become more and more data focused, we ask should the value of data be on the balance sheet?
Industry leaders instinctively know that data and information is becoming increasingly valuable to their businesses. Any balance sheets’ assets can be split into the tangible, e.g. ships and equipment, and the intangible, eg. intellectual property. Despite fitting the criteria of an intangible asset, there is still no formal way to value data and record it on the balance sheet.
“We are in the midst of the Information Age, yet information is still considered a non-entity by antiquated accounting standards,”
What gets measured gets improved. Recording the value of data on the balance sheet will create awareness among employees and shareholders of its existence and drive its use for enhanced decision making and good practice in its storage and collection. Everyone is collecting data, but if it’s not properly used, maintained, and secured it can quickly become a liability.
Practical ways to calculate the value of data
It’s easy to say we should be recording the value of data on a balance sheet, but it’s much more difficult to actually come up with a number. A good starting point when attempting to calculate the value of data are these three factors:
- Cost of acquisition – How much does the data cost to acquire and store? This could be the cost of installing and running sensors, purchasing the data from a third party, or the man-hours involved in processing it. Whatever the data source, there will be some sort of cost to acquire, store and process it which is relatively easy to calculate. This is particularly useful for data which is warehoused but not actively used in any business processes.
- Value to the business – What’s value does the data drive? For those who use data to drive business processes or make decisions, it will likely generate value. Whether it’s money saved on bunkers or revenue from increased yield the business value that the data generates is measurable. Another method is to look at the intrinsic value of the data; if you were to sell this data set on the open market, how much would you get for it?
- Cost of loss – What would it cost the business if the data was lost? This is likely to be some combination of the cost of acquisition and the loss of value. If you had to start from scratch, what would it cost you? How would losing this data affect your revenue or expenditure?
A depreciating asset
Like any asset, the value of data depreciates over time. Historical data can be incredibly valuable, and once captured it can be incredibly cheap to store, but it’s important to remember that there are certain data types that will lose value very quickly. Customer data, for example, will always be a key revenue driver for any business, but only if it’s properly maintained. The longer it goes without proper maintenance the less likely it is to derive value. Because of GDPR, any personal data that is not properly managed can very quickly move from the asset column to the liability column.
The good news is that the shipping industry isn’t behind the curve. This is a problem that all businesses in all industries are facing. AT&T was one of the first major companies to put this into practice. In 2011 they listed customer data on their balance sheet, valuing it at $2.7billion. But few others have followed suit in any meaningful way.
To caveat this post slightly, I’m not an accountant and this isn’t financial advice. That said, I have no doubt that data will become as important as property on the balance sheets of the future. Although pursuing a valuation of your data assets is not a light undertaking, I believe those who are able to get ahead of this trend will have a significant competitive advantage.