Publisher’s note: This blog was cowritten by Maurice L. Crescenzi, Jr., Industry Practice Leader, Moody’s.

In today's complex business environment, company reference data has become a critical asset for organizations aiming to achieve regulatory compliance and secure a competitive edge. This article explores the importance of comprehensive company reference data, its role in compliance, and how to use it to gain a strategic advantage.

Company reference data encompasses essential information about businesses, such as legal names, addresses, industry classifications, and supplier and partner details. It can also include product information and market positioning, both beneficial for benchmarking purposes. This data not only helps to meet regulatory requirements, but it also helps organizations make strategic decisions and achieve greater performance. Diligent Institute’s recent 

 shows that nearly half (45%) of directors actively seek more benchmarking data for exactly these reasons.

The role of company reference data in compliance

Company reference data plays a pivotal role in helping organizations meet legal and regulatory requirements. With the increasing complexity of global financial regulations, such as the General Data Protection Regulation (GDPR) in Europe, the Foreign Account Tax Compliance Act (FATCA) in the United States, and numerous compliance directives worldwide, organizations face greater challenges to understand 

. Failure to comply with these regulations can result in severe consequences, including financial penalties, reputational damage, operational disruptions and other 

"I think most companies don't think enough about their data systems. They've just got used to them and don't think about what more insights the base data can provide about what they're doing." —Head of Compliance, corporate sector, UK (source: 

Accurate company reference data helps organizations identify their third parties — from suppliers to customers, distributors, agents, and more — aiding their compliance efforts with regulatory standards. 

Moody’s global entity verification study

 found that 9 in 10 respondents rate entity verification as “essential” or “important.” The value of entity verification is also on an upward trajectory, with 73% of businesses anticipating its importance to increase over the next two years. Entity verification is predominantly used today for customer onboarding (78%), ongoing customer risk monitoring (73%), and investigations and enhanced due diligence (71%). Sales and marketing, supply chain management, crypto-currencies, and gambling represent use cases that, while less common at the moment, are quickly increasing in prevalence.

The significant strategic value of using company reference data

Beyond compliance, high-quality company reference data offers significant competitive advantage to organizations. Accurate data naturally aids directors, executives and practitioners in better decision-making, from market analysis and investment decisions to supply chain optimization. Savvy organizations can leverage this data to uncover market trends, identify potential customers or partners, and more comprehensively evaluate competitors.

For example, by analyzing industry classification data, a company can identify emerging sectors or markets ripe for expansion. Additionally, tracking changes in competitors' reference data, such as mergers, acquisitions, or changes in executive leadership, allows organizations to anticipate market shifts and adjust their strategies accordingly.

Case study: Leveraging company reference data for strategic advantage in consumer electronics

 If we take an example of the fast-paced consumer electronics industry; the strategic use of company reference data can significantly enhance decision-making capabilities, streamline operations, improve market analysis, and optimize supply chain management.

 A player in the consumer electronics sector struggles with scattered and outdated company reference data, leading to inefficiencies in market analysis, investment decisions, and supply chain operations. This results in missed opportunities, suboptimal resource allocation, and increased costs, ultimately affecting the organization’s competitive edge and profitability.

1. Enhanced market analysis and investment decisions

The organization embarks on a project to centralize and update its company reference data with accurate and up-to-date information on competitors, suppliers, and market trends. It uses advanced (and potentially AI-powered) analytics tools to mine this rich dataset, uncovering insights into market opportunities, competitor strategies, and potential investment areas with high returns. With real-time access to enriched company reference data, decision-makers have the information needed to make swift, informed choices.

By leveraging accurate company reference data, the organization improves its understanding of supplier capabilities, lead times, and reliability. Data-driven analysis of this information helps identify bottlenecks in the supply chain, so the organization can engage with the most efficient suppliers and streamline logistics operations. Adopting a data-informed inventory strategy reduces costs and improves responsiveness to market demand fluctuations.

Armed with up-to-date and comprehensive company reference data, the company swiftly adjusts its strategies to better meet market demands and exploit new opportunities, leading to an increased market share.

The strategic use of company reference data in investment decision-making leads to more targeted and efficient resource allocation, enhancing the company's ROI on new projects and technologies.

Optimized supply chain operations, informed by robust company reference data, results in a 15% reduction in operational costs and significantly improves their supplier and customer satisfaction levels.

 This hypothetical scenario highlights the critical role of company reference data in empowering an organization to refine its strategic decision-making processes. The focused effort to maintain and use accurate company reference data transformed the company's approach to market analysis, investment decisions, and supply chain management. By placing company reference data at the heart of its strategy, the enterprise not only achieved operational efficiencies and cost savings but also strengthened its position in a competitive market.

The importance of data quality in the age of AI

Data quality is paramount in the age of artificial intelligence (AI) and machine learning, especially with the recent 

. AI adoption in risk and compliance is on the rise, with 11% of organizations survey respondents now actively using AI — an increase of 2% on 2023’s findings. Furthermore, 29% of respondents are currently trialing AI applications — 

an 8% increase on Moody’s findings last year

“Quality” encompasses several critical dimensions:

Accuracy – checking that the data correctly represents real-world entities and events

Completeness – requiring that all necessary data is present

Consistency – demanding that the data is uniform across different sources

Timeliness – confirming that the data is up-to-date

Relevance – meaning that the data is pertinent to the task at hand

Maintaining high-quality company reference data presents a multifaceted challenge, particularly in an era where AI and machine learning applications are omnipresent across sectors. The complexity arises not only from the sheer volume of data but also from its variety and the speed at which it is generated.

The stakes are high: The output quality of AI systems is directly proportional to the input data quality. This direct correlation underscores the critical importance of investing in and continuously improving data management practices. According to Moody’s entity verification study, it is widely recognized that poor data quality can trigger a cascade of adverse outcomes. For instance, inaccuracies in customer data could lead to misguided customer segmentation, affecting marketing strategies and, ultimately, sales. In more severe scenarios, flawed data can result in decision-making errors with significant financial and reputational repercussions. AI applications amplify these ramifications.

For example, biased data can train AI systems that perpetuate these biases, leading to ethical issues and fairness concerns. Similarly, incomplete data can produce AI models that can’t be generalized, limiting their applicability and effectiveness. Given these considerations, organizational leaders and boards should prioritize inquiries into their data management practices. Key questions might include:

How do we assess and monitor the accuracy and completeness of our data?

What mechanisms are in place to ensure consistency across data sources?

How frequently is our data updated, and does this meet the needs of our AI applications?

Are we collecting data that is relevant to our current and future AI endeavors?

How do we safeguard against bias in our datasets?

Addressing these questions is not a one-time task; rather, it is a continuous process that requires engagement from across the organization, starting at board level. In the age of AI, where data-driven insights and decisions are increasingly integral to success, data quality cannot be an afterthought. It is a foundational element that demands attention, investment, and strategic oversight.

Strategies for improving company reference data management

To enhance company reference data management, organizations can adopt several strategies. Technology plays a crucial role in improving data quality and accessibility. Data integration platforms, cloud storage solutions, and advanced data analytics tools can help organizations manage their reference data more effectively. Moody’s entity verification study also highlighted the benefits that the market have already realized from robust data governance strategies:

Creating a culture that values data accuracy and integrity enhances the likelihood of success. This includes regular audits, employee training, and adopting leading best practices in data governance. By prioritizing data management, organizations can keep their reference data accurate, up-to-date, and reliable.

Company reference data is a critical asset for organizations aiming to navigate the complexities of regulatory compliance and gain a competitive advantage. Accurate and comprehensive reference data is essential for meeting legal requirements and making informed strategic decisions. By prioritizing data quality and adopting effective data management strategies, organizations can leverage company reference data to drive significant business value and achieve a competitive advantage.

Diligent ERM Reporting, powered by Moody’s

 empowers executives and the board to make risk-informed decisions with confidence by combining critical internal metrics with external risk factors benchmarked against top competitors. 

Set the bar higher: Using company reference data to boost compliance and gain a competitive advantage

An effective board succession plan is a cornerstone of good corporate governance. It ensures a smooth transition of leadership, maintains the board's effectiveness and fosters the long-term sustainability of the organization.

But with board members serving staggered terms and departures sometimes unexpected, identifying and developing future board leaders becomes a critical, ongoing process. This blog post addresses some frequently asked questions about 

The benefits of a board of directors’ succession plan

The steps an organization should follow to create a plan

How technology can streamline the planning process

What are the benefits of a robust board succession plan?

A well-defined board succession plan offers numerous benefits to organizations: Minimizes disruption caused by board member departures, planned or unplanned

Allows for the identification of candidates with the necessary skills and experience to address the board's evolving needs and strategic direction

Demonstrates thoughtful governance practices, which can enhance investor confidence and attract top talent.

 and identify any areas where additional expertise may be needed.

Helps visualize potential vacancies with a matrix that maps current board members' terms, expertise and leadership aspirations against the identified skill gaps.

, which strengthens the board's decision-making by fostering more inclusive discussions and challenging assumptions.

Encourages board members to identify potential candidates from their professional circles who align with the organization's values and skillset needs.

 opportunities for new members in specific areas like board governance, financial reporting and risk management.

Integrates new members into relevant board committees based on their expertise and interests.

Key steps in the board succession planning process

There are several important steps in the board succession planning process. That means it can't be done in one afternoon. It must be handled carefully and always involve the whole board. After all, as your business evolves, so too does the need for what future board members can bring to the table.

Here are the steps you should follow when devising your plan:

Step 1: Create a board development committee

Establish a team of directors who will lead the planning process. This ensures accountability which helps with moving things forward. Board members should be assigned specific roles and responsibilities.

If members aren’t quite sure where to begin, a 

Succession planning is often dismissed as tomorrow’s problem, so you need to build engagement among the organization and ensure the importance of succession planning is established.

Think about what the business priorities are now and what they may be in the future. These will align with your overall goals and objectives and allow you to focus your efforts on the sort of qualities you’ll look for in future leaders.

 to make sure no part of the process is overlooked.

Step 4: Complete regular board self-assessments

 allows your organization to evaluate the effectiveness of your board. This means you can identify areas that need to be improved, which can be incorporated into your plan. Evaluations should be completed routinely, so you can proactively make positive changes and ensure the continuous effectiveness of your board.

A skills gap analysis will help you identify which skills your board lacks so you can make an effort to bring in new talent with these specific skills. A variety of skills helps you become more agile, flexible and proactive.

Step 6: Be mindful of the need for diversity

A board with members all who have similar backgrounds, skills and experiences is unlikely to be as effective as it can be. 

 should be considered at all times, including gender, race, beliefs, age and more. This helps propel your business forward and introduces new perspectives and ideas.

Step 7: Encourage transparency at all times

Ask your board to be as transparent as possible so you know when there may be an upcoming vacancy on your board. This may be due to them being offered a position elsewhere, retirement, or something else. Of course, not all members who depart the board can be foreseen, but openness and honesty should always be encouraged.

Step 8: Create a list of possible candidates

If you’ve followed the previous steps, you’ll now be in a solid position to identify which candidates will slot into your board well. This includes ensuring diversity, gaps in skills are filled and you can continue to push towards your goals and objectives. Whether these roles become available in the near- or medium-term future, you’ll be prepared once opportunities arise.

Addressing challenges in board succession planning

Creating a board succession plan is a continuous and necessary process to protect the future of your business. However, as with every other important action, it can come with challenges that you need to address.

Here are five challenges you may face and how you may choose to address them:

 Fear of the unknown or risks of upsetting the status quo can lead to resistance to change. This can prevent proactivity and lead to delays down the line if not addressed ahead of time. The board must encourage open communication and the benefits must be emphasized to ensure the long-term stability of the business.

 Once you identify the skills, qualifications and experience required in candidates, finding those who have these and align with your organization’s culture and values can be tricky. It’s also possible that you’ll find the perfect candidates, but then their priorities and availability will change.

 Getting new board members up to speed can be a long and complicated process. This includes everything from the history of the business to specific operational nuances. A mentorship program can help with this, as can comprehensive ‘user notes’ which act like a bible that new board members can refer to.

Ensuring diversity in your board of directors is important and finding candidates that are suitable may be difficult due to biases, limited networks, or your usual recruitment processes. This can impact decision-making and can limit new ideas and innovations. Consider reevaluating your recruitment processes and highlighting our desire for a more diverse and inclusive board.

 Identifying and developing future board leaders can be a long process and is one where decisions shouldn’t be taken lightly. As a result, you may be forced to make a rushed decision if you don’t give yourself enough time which may result in recruiting a board member that doesn’t align with your organization’s needs.

To help overcome potential issues, here are four board succession planning best practices to consider when putting your own plan together:

By not assigning roles and responsibilities to specific board members, you risk things simply not getting done. Accountability is key, so give board members roles and timeframes to keep the process moving. Because change can happen quickly and at any time, proactively thinking about the board’s future helps prevent issues and delays down the line, which can have a huge negative impact.

2. Tie all decisions back to the goals and objectives of your business

Use data to identify what your business lacks and what it needs to move forward. This may be specific skills you identified in a skills gap analysis, increased diversity, or a greater understanding of emerging technologies and practices.

You must undertake regular board evaluations so you can spot opportunities for improvement as early as possible. Any decisions you make should be for the benefit of your organization and its goals and objectives.

While the process should be confidential, complete openness among all board members is critical. This helps with communication and trust, which leads to better decision-making.

4. Leveraging technology for streamlined succession planning

Certain parts of the succession planning process may not be done as effectively as possible if you don’t have all the right technology in place. Spreadsheets and notepads will only get you so far.

The implementation of new tools and technologies, such as 

, ensures processes are streamlined and efficient. This allows you to get all the data you need to make impactful decisions in less time.

Here are other technologies you can introduce that improve the planning process:

Digital communication platforms, such as Slack or Microsoft Teams, provide a central platform to share information even if you have a fully office-based team

Talent management platforms, such as LinkedIn Recruiter or Indeed, used to find potential candidates

Knowledge-sharing platforms, such as SharePoint, where documents and knowledge can be stored and shared

Mentorship platforms, like Chronus, help give new board members all the knowledge they need

Project management tools, such as Asana, which helps assign tasks to specific board members and increase accountability

Meghan Day, Principal Solution Designer, at Diligent says, “

Technology plays a major role in ensuring that processes are not only fast and efficient, but also accurate and simple to understand. This allows boards to make data-driven decisions far more quickly, which frees up their time for other tasks. This is especially true of the board succession planning process, which is often long and drawn out. Technology streamlines each step and helps secure the future of an organization

By proactively identifying potential board leaders and dedicating resources to their development, organizations can build a strong pipeline of talent to ensure the board's effectiveness for years to come. A well-planned and executed board succession process fosters smooth transitions and continuity in leadership.

Remember, board succession planning is an ongoing process. Regularly review and update your plan to reflect changes in the organization's needs, the board's composition and the broader business landscape. By developing a robust board succession plan, you can ensure that your organization remains well-governed and positioned for long-term success.

 to discover how our board management software can improve your board’s performance and help streamline your board of directors succession planning process.

How can we identify potential future board leaders?

Identifying potential board leaders requires a proactive approach. Here are some key strategies:

Skills gap analysis: Regularly assess the board's 

 and identify any areas where additional expertise may be needed. Consider factors like industry knowledge, financial acumen, legal background, and technological fluency. This analysis helps define the ideal profile for future board members.

Succession matrix: Develop a matrix that maps current board members' terms, expertise and leadership aspirations against the identified skill gaps. This helps visualize potential vacancies and ideal candidates to fill them.

Diversity and inclusion: Seek a diverse pool of candidates with a variety of backgrounds, experiences and perspectives. 

 strengthens the board's decision-making by fostering more inclusive discussions and challenging assumptions.

Several avenues can lead to qualified board candidates:

Current board members: Leverage the existing board's network. Encourage board members to identify potential candidates from their professional circles who align with the organization's values and skillset needs.

Executive leadership team: The CEO and other C-suite executives may have valuable insights into qualified external candidates with relevant experience.

Industry associations and professional networks: Look for individuals with strong reputations and relevant expertise within industry associations or professional organizations.

Executive search firms: Retain a reputable search firm specializing in board placements. Specialists have access to a wider pool of candidates and can efficiently manage the search process.

How can we cultivate future board leaders?

Once potential candidates are identified, active development is crucial:

Board observer programs: Invite high-potential individuals to attend board meetings as observers. This allows them to gain firsthand experience with board dynamics and decision-making processes.

Mentorship programs: Pair potential board members with experienced board members. Mentors can provide guidance on board governance best practices and help navigate the intricacies of the role.

Board committee participation: Offer qualified non-board members the opportunity to participate in specific board committees focused on areas where they have expertise.

How can we assess a candidate's suitability for board service?

A thorough assessment process ensures you select the most qualified candidate for the board. Here are some key considerations:

Skills and experience: Verify that the candidate possesses the essential skills and experience identified in the succession plan. Look for a proven track record of success in their respective fields.

Integrity and judgment: Assess the candidate's character, ethical principles and ability to make sound decisions under pressure.

Commitment: Gauge the candidate's willingness to devote the necessary time and effort to effectively serve on the board.

Strategic thinking: Evaluate the candidate's ability to think strategically, consider long-term implications and contribute to the organization's future direction.

How can we integrate new board members effectively?

Diligent

Blog

Set the bar higher: Using company reference data to boost compliance and gain a competitive advantage

Board succession planning: Identifying & developing future board leaders

Solutions

Resources

Company

Your Data Matters

Diligent

Blog

Set the bar higher: Using company reference data to boost compliance and gain a competitive advantage

Board succession planning: Identifying & developing future board leaders

SolutionsSolutions

ResourcesResources

CompanyCompany

Your Data Matters

Solutions

Resources

Company