Driving compliance and sustainability with master data management (MDM)

How geopolitical challenges can be approached with master data management

Real wars and trade wars are evidently making the geopolitical environment more complex, more risky and harder to navigate for enterprises facing a series of challenges. On top of the geopolitical issues the world needs to dramatically change the world economy in favor of sustainability, re-generation, and circularity.

In corporate everyday life it is a growing leadership challenge and huge operational task to secure compliance with anti-terror sanction lists, ESG regulation, awareness of politically exposed persons, financial regulation and much more.

As a specialist in MDM, it seems to me that a lot of midsized companies are missing out on a fairly straight forward way to approach these challenges. In an increasingly digital economy, you can add attributes to the master data (data about the data) and by these attributes become compliant by default. This extraordinarily strong foundational approach will eliminate un-intended and un-desirable use of data creating the behavior you need.

Sanction lists and MDM

One very tangible example is sanction lists. The purpose is of course not to finance, support or help terror organizations and regimes. In our own company (NTT DATA) we need to be compliant to EU and US regulations covering product and knowledge categories like ERP, CRM, BI, SCM, data warehousing and more. In fact, our MDM solution GLASSWING is not to be exported to Russia, North Korea and other foreign countries and regions.

Like us, many companies deliver dual-use products, that are civil products which can be used for military purposes and therefore covered by sanctions. For one client we have implemented these export controls directly in their ERP-system using MDM. This makes it impossible to break the rules in the digital workflow. Even if the mother company exports a product to a daughter company the attributes travel with the product.

Driving compliance and ESG with MDM

Using MDM for compliance is not business as usual. In fact, the case above is an exception to the rule that midsized companies normally do not use this approach.

Both dealing with sanctions and with ESG companies will have direct and indirect advantages in un-leashing the power of MDM. If you need to calculate a CO2-footprint of a product the size and weight matters and the exact geographical location matters too, because there is significant difference between the transportation of 3,8 kg and 38 kg from Shanghai or from San Francisco. Pretty basic but nevertheless an important reminder of the governance effect of master data. Of course, there a many other ways to control compliance with MDM, and the big question is why it is not more commonly implemented.

Proactive master data management

One particularly important answer is what I would call the “too-little-too late”-approach to MDM. The whole discipline and toolbox of MDM is often seen as a second layer and a “reparation” of a running it-installation. This should be buried once and for all. Why build a huge hospital to cure a disease that you can prevent from ever becoming a problem?

MDM should be proactive. It is not (only) about reactive response and a motor for correction. Instead, you should have an approach of elimination of errors in the first place, which can be done by robust control and guidance in the in-data-processes. And this philosophy is also the key to activate MDM in relation to the big compliance issues we are facing in big and smaller companies.

C-level attention for MDM

Another crucial step is to place responsibility and knowledge about MDM closer to C-level. I suggest a value-centric approach to MDM as opposed to a focus on cost reduction, and the organizational fix point for MDM should not be a tiny office in a cellar under the data center.

By getting the attention of CFOs, CEOs and CROs Master Data Management could become an extremely hard hitting and foundational tool in terms of compliance and ESG. This could open for an all-encompassing MDM effort driven by simplification and automation of end-to-end business processes.

Naturally, this robust management of data has to do with the AI transformation. To innovate with AI, it is key that your data has the quality.