Implementing an ERP system transforms firms digitally. However, poorly planned ERP initiatives can lead to consequences like data governance and compliance issues. Due to this, firms can face legal penalties, regulatory investigations, and reputational damage. So, how can firms prevent undue costs, risks, and legal investigations?

What is ERP?

Oracle defines ERP as:

“Enterprise resource planning (ERP) refers to a type of software that organizations use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.”

What are the Mistakes that Lead to Data Governance Issues?

1. Poor Data Classification 

Proper data classification is critical to achieve regulatory compliance and data security. It helps to know the data types and their location. Poor data classification and handling can hinder the data quality and improper storage and sharing activities.

2. Sparse Data Privacy and Security Controls

Firms must ensure that their framework has the following data privacy controls:

• Simplify data management and protection strategies
• Maintain confidentiality
• Secure data from loss and unauthorized access

Lack of data privacy controls can make the firm non-compliant with data protection laws. Poor data security controls put them at risk since ERP software is a prime target for hackers. Therefore, during implementation, it is vital to address errors like-

• Poor data backup and recovery processes
• Weak access controls and encryption methods

3. Faulty Data Documentation

Data assets documentation is one of the major challenges of ERP adoption. Firms must document the data sources and models immediately using metadata, data lineage, and dictionaries. Faulty documentation can make data discovery and auditing processes hard.

4. Pending Issues in Data Quality

Controlling, monitoring, and improving data quality is an ongoing process that results in precise and consistent data.

Failing to address data quality issues can lead to wrong business decisions and limit the firm’s ability to meet compliance requirements.

What are the Best ERP Implementation Practices to Avoid Data Governance Issues?

Firms must schedule the implementation sequence correctly. Firstly, they must consider the availability of the project team, manager, and in-house experts who will help.

Map out the needs to help build core software or tech that can expand with the business requirements. This way, firms can adjust the strategies and KPIs to fit the specific requirements.

Here are some key practices to avoid data Governance issues during ERP implementation.

1. Have a Solid Data Governance Framework

A good data governance framework helps prevent major data Governance Issues. It must include guidelines that explain the data scope, standards, and policies.

At the same time, it must have an organizational structure with robust monitoring and metrics guidelines. This way, firms can set priorities that will help them measure the success of the data governance strategy.

2. Set Policies and Controls

Setting the right policies and controls is the key to solid access controls. It helps regulate how and when firms grant access to specific data and to whom. These policies and controls must have user identification, authentication, and authorization factors.

Furthermore, the policies must state enforcement approaches to evaluate, monitor, and update access controls. It can be evaluated by assessing employee controls and identifying whether they have the right access levels.

3. Plan Regular Audits

Firms can plan internal audits or hire an auditor. In the context of data governance, audits must be done to assess-

• Data inventories, access, security, and quality
• Data records and content management methods
• Policies and procedures of risk management

Audits can help find gaps and refine the data governance procedures.

4. Use Data Management Tools 

Data management tools can help support the data governance policies as they integrate all the aspects of the data lifecycle.

The aspects include generation, collection, storage, analysis, and interpretation of data. These tools will help firms handle the data more efficiently and securely.

However, the tools are effective only when they are used correctly. Hence, ongoing training is essential for employees who create, capture, and analyze data.

Also Read: Leveraging Cloud-Based Enterprise Resource Planning (ERP) to Future-Proof Business models

5. Build a Change Management Strategy

Organizational change can evoke resistance among employees. It hinders the effectiveness of the data governance policies and procedures.

Building a change management strategy can help firms communicate the impacts of ERP implementation on data governance. Employees need to understand ERP software’s importance to help them focus on understanding its benefits.

Conclusion

As per a recent report by Panorama Consulting, “The 2023 ERP Report,” most firms prioritized ERP implementation (36.1%) as compared to other IT projects. Successful ERP implementation pushes firms beyond the finite functionalities of the legacy system. It helps them adopt new system capabilities through ERP adoption. However, not all implementation processes run seamlessly.

Firms must follow these above implementation strategies to avoid data governance issues. It is vital to build a solid data governance framework with proper controls. Moreover, regular auditing will help learn whether or not the data governance is on track. Best methods will help prevent common pitfalls and help realize the uses of the ERP solution quickly.

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