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Corporate Finance, DeFi, Blockchain News

Big Data, Big Business, Big Ethical Questions?

By Konrad Schwenke (Senior Consultant, Forensic - KPMG) in Advisory, 26.01.2016.

Konrad Schwenke
Konrad Schwenke
Big Data seems currently to be everywhere and a number of companies are working on their data strategies in order to formulate how they want to benefit from their data treasure chest. At the same time the topic is also picked up by regulators. The Financial Conduct Authority of the UK announced that it will scrutinize the use of Big Data by insurers and how it affects their customers[1]. And the Federal Trade Commission (FTC) in the US is watching the use of Big Data about customers to ensure that it is not used to identify vulnerable customers for scamming[2]. The FTC plays an important role as the enforcement agency for the Fair Credit Reporting Act and the Equal Credit Opportunity Act which both prohibit unfair lending practices based on information gathered about certain customers and users by data brokers.

So what is so new about Big Data?

So what is so different about Big Data compared to data collected by companies so far? Big Data describes the shift towards larger amounts of data and the aggregation of data from different sources to gain new insights[3]. As an example, a credit lender could not only rely on databases containing the credit history of potential customers, but could draw on information about credit risks associated with such seemingly disjoint factors as the neighborhood you live in, the number of spelling errors when filling in forms or the names of your children. An industry which is at the forefront of using Big Data is the insurance sector[4], with a great potential for product individualization. Big Data makes it possible to identify and quantify the impact of a vast number of factors on the risks associated with a contract. But would you consider it fair if the price for your health insurance depended on your address? Where is the limit between individualized products and legitimate price discrimination on the one hand and illegitimate discrimination of persons based on factors such as your preferred food on the other hand?

The importance of ethical considerations

In order to prevent regulatory and reputational risks arising from a misuse of data, companies should include legal considerations when devising Big Data strategies alongside business considerations. But legal considerations will not be sufficient, as current legal frameworks do not (yet) adequately address issues arising from Big Data. This is why ethical considerations become critical. There may not be easy or clear-cut answers to the ethical questions but companies still have to think through such questions before taking decisions on how to use Big Data.

Asking ethical questions will also help companies to make sure that they comply with the (ethical) spirit and purpose of laws that may not address all questions raised by Big Data projects in adequate detail. The company’s ehtical culture and the tone set by the management are key to enable an open and thorough discussion of ethical aspects of Big Data projects.

Can you be transparent?

A simple test for your data strategy and policies: How would your users and customers react if they knew how their data is being handled and what it is being used for? If you would prefer them not to know, it is certainly a clear sign that you should give some thought to ethical questions, in order to avoid reputational risks for the entire business. Anything you don’t want the public to know because it could harm your reputation is an imminent risk and often indicates that there are challenging ethical questions to be considered.

However, medical data is a prime example that the answer is not always a simple “personal information must not be disclosed ever”. Most people want to control who can get access to their medical records. It would be desirable to use aggregated data to devise better treatments and also to enable a more individualized approach to medicine, but the same data should not become available to insurers.

What should companies consider?

Strategic business considerations are the motivation for undertaking Big Data projects, and they are at the center of attention. However, the strategic layer needs to be complemented by legal considerations, and has to be embedded in a solid ethical foundation in order to address risks arising from the Big Data project.

As a starting point, the following four points can serve as guidelines when planning and implementing a Big Data project:
- Companies collecting data should provide transparency and choice to the users. This may clash with the goal of obtaining as much data as possible in the short term.
- Companies have to take reasonable steps to protect the information they collect. Through the combination of data sources a lot of information which seems to be anonymous can become personal information.
- Companies which are the end users of data, either bought or collected themselves, need to ensure that the data is used responsibly. This may also imply forgoing some opportunities that are technically feasible and commercially attractive, but ethically questionable. In such decisions, the ethical culture of an organization plays an important role.
- No company should have to be afraid of their Big Data strategy becoming public.

[1] FCA publishes Call for Inputs on Big Data:
[2] Protecting Privacy in the Era of Big Data:
[3] “Ethics of Big Data”; Kord Davis, Doug Patterson; O’Reilly; 2012
[4] Impact of Big Data on the insurance industry:

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Mercredi 17 Février 2016