New Data Management Tools Outperform the Status Quo in Ag Risk Mitigation
In the 21st century marketplace, data management is business management. The technological advances of recent decades have unlocked new opportunities at every level of every industry. Cloud computing and big data represent a revolution in risk analysis and business decision-making.
The data of most importance to the ag industry – indicators on drought, groundwater, water sources, wildfires, soil quality, and local regulation – more often than not remain siloed. Water rights records in California, for example, are distributed across 58 county courthouses and repositories – largely in paper form. As described by the LA Times:
“A fundamental resource underpinning our economic, social and environmental well-being is managed with 19th-century information technology.”
With the impacts of climate change on agriculture accelerating, the financial institutions that drive US ag have a vested interest in using water and climate data to assess risk and inform the mitigation strategies essential to long-term resilience. Those that invest in data-management tools that allow them to contextualize their financial records will remain competitive. Those that do not will expose themselves to unnecessary risk.
This post will explore how data management tools empower financial institutions to outcompete the status quo in risk mitigation.
Deficiencies of the Siloed Status Quo
The present state of ag data should pose a significant concern for businesses seeking to thrive in the 21st century. The challenges of the status quo largely boil down to a key issue: siloing.
Siloing occurs when different datasets that must add up to inform due diligence, lending, and investment decisions aren’t easily accessible. This can happen at a variety of scales.
Within a company, different departments (e.g. sales and marketing) might keep separate records. More effective data management might link this information together, allowing both teams to track leads along the customer journey and optimize strategy in tandem. On the scale of an industry, records might be stored in different formats or (if analog) disparate locations.
In the ag industry, the problem is quite acute. The factors influencing the yield of a harvest or the valuation of a parcel are numerous and the datasets required to understand their potential impacts are almost all siloed away.
For example, when ag professionals evaluate the water risk of a particular parcel, groundwater data alone is insufficient. Only when examined alongside data on water rights, precipitation, water district allocations, market prices, and grower practices can a holistic understanding emerge.
Once acclimated together, data becomes more than the sum of its parts. Kept apart, it can impede more than it illuminates.
More precisely, siloing hinders ag finance in two key ways. Those that ignore it make riskier decisions and the traditional ways to combat siloing cause enormous inefficiency.
According to the Harvard Business Review, 80% of the work in corporate data science is spent acquiring and preparing data.
Siloing results in an enormous sink of time and money. Manually combing through paper records, collecting data from dozens of sources, and converting all of it to a mutually compatible format slows down decision-making.
With so many steps and moving parts, miscommunication and delays are almost unavoidable. As explored in the second half of this post, investing in data management tools can alleviate these burdens and turbo-charge analysis.
For those that forego rigorous data analysis, lending and investing while ignorant of key information is dangerous. With climate change increasing the volatility of agriculture’s ecological factors, financial institutions without precise, up-to-date information can be blindsided by losses from ever-more-extreme climate events.
This scenario isn’t a distant hypothetical. The IPCC’s August 2021 report on anthropogenic climate change not only cites drought and wildfires in California as examples of active social and economic damage, but projects issues such as groundwater depletion and soil aridity will continue to worsen as global temperatures keep rising.
In the face of dynamic threats, static data won’t do. Data acclimation will.
Opportunities of the Data Revolution
New data management tools are revolutionizing business and offer ag finance professionals a spectacular opportunity to build resilience in their portfolios. Upon overcoming the challenges of data siloing, ag finance institutions can outperform their competitors by leveraging data-driven insights to implement risk mitigation strategies.
Water and climate risk are inevitable – but those able to best prepare their portfolios can outcompete those relying on half-measures.
By integrating proprietary data from portfolio records with climate and water data, financial institutions can identify the most effective mechanisms to mitigate risk at the parcel level.
Each parcel faces a different combination of risks that require different approaches to build resiliency. Integrating granular 3rd party data into 1st party financial data enables targeted, hyperlocal responses to the highly volatile risks of the 21st century.
This integration works best when done geospatially.
Climate and water risks are foundationally geospatial. As such, the business implications of those risks likewise play out in the same medium. Geospatial data management tools connect data together in powerful, insightful ways – unlocking interactive maps and other easily accessible methods to process the vast quantities of contained data.
While these technologies prepare financial institutions for the future, ultimately, they are necessities of the present.
According to Forbes: “In 2021, connected data is table stakes. The ability to view data, derive insights from it and have one source of truth could be your advantage over competitors who are held back by silos and poor quality data.”
Data acclimation – a service provided by AQUAOSO’s GIS Connect – was designed to fill these very needs. Identifying risk is the first step in mitigating risk. Identifying risk begins with acclimated data.
Much of the data essential for informed decision-making in the ag sector remains trapped in isolated datasets and incompatible formats. Data acclimation uses data management tools to un-silo and integrate the info ag finance professionals need.
This can be done by integrating third-party water and climate risk data, financial institution-owned portfolio data, and borrower data. Rather than spending time and money to manually compile disparate datasets and process them for comparison, a data acclimation service handles aggregation automatically.
The right data management tools can save time and money by providing up-to-date, holistic context that easily integrates with portfolio records. Once implemented, finance professionals can spend less time fighting their data and more time using it to compete.
AQUAOSO’s products are purpose-built to help ag finance professionals understand and monitor their water risk by enhancing data management.
The GIS Connect platform allows users to integrate third-party data sets with their own data in a secure GIS data management platform. View loan, investment, supplier, and appraisal data in a single geospatial view. Integrate data with best-of-breed land and climate data through secure APIs. Manage board and regulatory requirements with automated geospatial data management, information collection workflows, and reporting.
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