Why data valuation is now a CFO's problem

It is tempting to file data under the people who build and manage it, the CDO or the engineering team. But managing data and accounting for its value are two different responsibilities. The data team is responsible for the asset. The CFO is responsible for how the company's value is financed, reported, defended and realised and at present a large share of that value is unmeasured and therefore unmanaged.

Most CFOs can say precisely what the company's property, equipment and cash are worth. Far fewer can answer the same question about the data that may be the single most valuable thing the business owns. That is a gap in financial stewardship and it becomes most visible at the moments the CFO owns.

The moments where it matters

Raising capital. Investors increasingly price a business on its intangible strength, including the defensibility of its data. A business that can articulate and evidence what its data is worth is better placed to have that value recognised in the conversation.

Selling the business. In an exit, a buyer's diligence team will examine the data asset closely whether or not it has been valued. Having an independent, well-evidenced valuation helps the seller shape that discussion rather than having the value and any perceived weaknesses, defined entirely by the buyer.

Borrowing. Lenders are beginning to recognise data and other intangibles in lending decisions, and in some jurisdictions as collateral in their own right. A credible valuation can broaden financing options and support better terms. An unquantified asset tends to do neither.

Audit and reporting. As standards bodies move, gradually, toward better recognition of intangibles, boards and auditors are asking sharper questions about where enterprise value actually sits. Being able to point to a rigorous valuation of the data asset is a way to stay ahead of those questions.

Board and strategic decisions. It is difficult to govern, insure, protect or invest sensibly in an asset that has never been valued. Boards increasingly expect to understand the value of the company's data with the same confidence they bring to any other material asset.

The cost of leaving it unmeasured

The understandable temptation is to treat this as a question for another day. The difficulty is that the cost of leaving it tends to surface at the least convenient moment: partway through a raise, a sale or an audit, when there is no longer time to do the work properly and the value either goes unclaimed or gets challenged.

Value that has not been quantified is hard to argue for in a negotiation. A data asset that has never been examined can become a surprise in someone else's diligence. And a balance sheet that isnt showing most of what a company is worth is a steadily harder thing to stand behind as that gap grows.

What a credible valuation involves

Recognising the question is the first step; answering it well is the second. A valuation is only useful if others will trust it, which in practice means it should rest on a recognised framework such as the International Valuation Standards, draw on more than one method, consider the quality of the data rather than only its volume, and take account of whether the business actually has the right to use the data in the ways assumed. Those are the features that allow an auditor, investor or acquirer to rely on the result.

But the starting point is simpler than any methodology. It is recognising that "what is our data worth?" has become a finance question and that answering it credibly, ideally before the moment of need, is increasingly part of the modern CFO's role.

As data becomes a larger part of what makes companies valuable, understanding what it is worth is moving from a curiosity to a normal part of how finance leaders account for, and stand behind, the value of the businesses they help run.

Data Valuation Partners produces independent, standards-based valuations of data as an asset.