In the world of business, having the right information at the right time can be essential to long-term success. Gathering business data was not always easy or efficient in the past, but modern systems allow businesses to utilize data science in risk management to protect critical assets and prevent losses.
It’s not enough to simply hire a big data firm to analyze your firm’s data or provide industry data sets. Savvy business leaders put that data to use in a way that translates to an improved bottom line. Continue reading to learn how nearly any Canadian business can improve its risk management with a well-planned use of big data.
How Does Big Data Help Manage Risks?
The benefits of big data may help a company improve sales, lower costs, streamline staffing, and more. Applying big data to risk management is helpful for improving financial, digital, and other parts of the business. Here are some common examples of where big data and risk management come together to help businesses like yours.
Identify fraud
One of the most obvious uses of big data science in risk management is fraud prevention. Using large datasets, it’s possible to zero in on suspicious activity in real-time to prevent future losses. You may have seen this in action when a potentially fraudulent credit card transaction was blocked at the point of sale. Big data is deeply integrated into payment processing systems. This is just one example of the benefits of big data for business.
Financial risk management
Your business may offer credit to current and new customers. If you are willing to deliver a product or service before taking payment, your business is extending credit. Big data may help your business understand credit risks and the likelihood of full payment before delivering a product or service on credit.
Reduce customer churn rate
Repeat business is the lifeblood of many companies. If you are losing customers and don’t understand why it could be detrimental to long-term revenue. Part of financial risk management is preventing customer losses. Big data could help your sales or operations teams identify which types of customers are most at risk and opportunities to avoid customer churn.
Reduce employee attrition
Losing employees is a major cost for some businesses. Each time someone leaves for any reason, the business loses that person’s knowledge and productivity. It takes time and money to post a job, interview and hire a replacement, and train the new hire. Human-resources focused analytics may help understand why employees leave. This gives you the ability to take action to lower the risk that your valued team members will want to search for a new job elsewhere.
Operational risk assessment
Most business managers understand the biggest risks in their operations, but it’s impossible to have eyes on every part of your business at once. The power of big data could allow you to identify new risk areas in your operations that might have cost your business but can be solved once you better understand the risks.
Digital risk management
According to a study by IBM, the average cost of a data breach is $3.86 million USD ($5.17 million CAD) and it takes an average of 280 days to identify and contain a breach. Big data analysis could help identify vulnerabilities before the digital bad actors do. In the event of a breach, a data analytics risk assessment could help patch the security flaw and put your business back on track as quickly as possible.
Lower risk for future growth
If you plan to grow your business, big data can be a valuable tool. For example, a retail or restaurant chain can tap into big data to learn about prospective locations. While managers used to have to rely on the look and feel of a location to make a gut decision, these days they can look at demographic and population data to greatly increase the odds of picking a profitable location every time.
The Potential of Big Data
Like any new business process, big data often comes with its own challenges. However, a good plan and the right partners may help any business take small steps toward lowering their risk through big data.
Contrary to a popular misconception, you don’t have to run a giant enterprise to use big data. Data science in risk management is here for all businesses. There’s no better time than now to take your first step to utilizing big data for risk management.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.