Data Nationalism in Motion: The Emerging Challenge to Global Business

By Scott Stephenson

Current world events appear to be following Sir Isaac Newton’s third law of motion: For every action, there is an equal and opposite reaction. How? In an age when technology has provided the ability to fade borders and enable globalization, the surge we see today in nationalism in many countries would appear to be globalization’s equal and opposite reaction.

But as with all things in motion, which action prevails may be only a factor of when. Take Brexit, for example. Will the European Union last, or for that matter, will the United Kingdom? How will Brexit change Britain? Will the next referendum on Scottish independence from the UK break a kingdom united? And what of Ireland?

Data Nationalism in Motion: The Emerging Challenge to Global BusinessContrary to the apparent surge in nationalism, data and technology have enabled us to make location “virtually” irrelevant. For many businesses, a solution to secure data centers somewhere off premises—hiring vendors to establish firewalls that keep information safe and instantly accessible—makes sense. Those data centers are now referred to collectively as “the cloud.”

But why would any institution concerned about security and privacy send data seemingly into the unknown? Although it first looks counterintuitive, a growing migration to cloud computing is based on some remarkably grounded reasons that involve cost, privacy, and potential for competitive advantage.

In terms of safety, users are able to store data in lockboxes known as virtual private clouds (VPCs). These are not unlike safety deposit boxes held within a bank vault. Essentially, they can be opened only by recognized depositors. An intruder would first have to break through a cloud’s firewall before approaching an encrypted VPC. And for industries subject to regulations about offshoring data—as governed in countries of the European Union—it’s even possible to anchor data to a specific geographic location. Likewise, some American companies continue to specify that their information remain in the United States.

Data meets nationalism

So, following Newton’s law, where does the action of exponential increases in data meet the action of nationalism? The answer lies in the practice of data nationalism, which actually predates many of the current events now making headlines.

If we boil down the issue of data nationalism to its essence, it’s about two things: allowing or limiting data flow between countries and protecting the personal data of a country’s citizens.

We must not forget that the two elements are not mutually exclusive. The most effective strategy would be to strike a healthy balance between allowing data flow and ensuring data security. Data flow will encourage international commerce and economic growth to benefit individuals globally. And that cannot be truly successful without being mindful of and responsible for ensuring the privacy and security of that data to protect individuals specifically and the well-being of society generally. That is at the core of how Verisk, as a global data and analytics company, does business.

It’s essential for regulators and governments worldwide to have the assurance that data is being handled responsibly and that those businesses that can’t meet that level of assurance will suffer for it. That will help ensure the individual’s privacy and security, and global business will reap the benefit as a result.

This level of privacy and security must be table stakes for international—and regional—commerce. And commerce on either level must meet those requirements. That said, achieving a healthy balance between security and information flow is critical, particularly now with the rise of nationalism, because governments and regulators must also realize the dampening effect overregulation could have on the global economy should commerce become too difficult or expensive. Short-term patriotism, whether for security or economic concerns, could hurt the world’s economies in the long term. As the old saying goes, “Rising tides lift all boats.”

Companies competing globally have a responsibility to customers, employees, and shareholders. It’s incumbent on business leaders to ensure individual security but also be vocal in advising regulators on the chilling effect that data policies may have. If restrictions are merely responsive to the heat of the nationalistic moment, the result could be a hampering of the future well-being of the individuals we need to protect.

What about the cloud?

Some companies are demanding their data remain anchored to a specific geographic location, and European regulators have been facing this issue head-on. In the interest of protecting privacy of consumers within the EU, they’ve passed laws to prevent companies in the United States and elsewhere from moving data to servers residing outside Europe’s borders. (In contrast, at the moment there’s no significant regulatory limitation on moving data to or from servers located in the U.S.) Now China is reviewing its own cybersecurity laws and appears to be headed toward a European, rather than an American, model of operating.

This can have major implications for businesses. Will American companies trading in China have to maintain servers there—in essence, being Chinese in China? And if such walls remain in place, can a company with global ambitions pivot and make the most of opportunities offshore?

Businesses that are not already global (some players in banking and insurance come to mind) will have to “think local” to achieve their ambitions. That may mean finding access to local data sets in targeted locations and perhaps using some form of centralized software, likely operating from the cloud. It’s a hybrid approach that deals with local limitations through the use of nimble, cloud-based solutions—the power of global gone local.

Leaps in data

Looking ahead, the advent of remote imagery, textual analyses, connected homes, and the Internet of Things will make risk decisions ever more targeted and available in real time. Analysts estimate that market penetration for smart-home technology should grow to between 25 and 30 percent by 2020. Given that striking leap forward in the collection of information, will the borders of data nationalism restrain technological advancements or the benefits they provide?

In fields as diverse as banking and oil production, we see path-breaking technologies offering new kinds of data points—in greater volumes and with impressive speed. This combination of data only helps to inform our analytic models. The result can be sharper risk assessment and selection. And a better understanding of risk tends to strengthen a company’s ability to plan, pivot, and move forward.

In considering the long-term sustainability of a business, it’s key to remember that decisions can be reached with more insight and accuracy through use of greater amounts of data and sophisticated analytic tools. That said, how will this tug-of-war between data nationalism and globalization end?

For now, probably the best we can suggest is to look to Newton’s second law: The acceleration of an object as produced by a net force is directly proportional to the magnitude of the net force and inversely proportional to the mass of the object.

If we consider data and technology the net force, the question then becomes, How large is the mass of data nationalism? Or is data nationalism the net force, and data and technology the mass? Even Newton may have had a struggle figuring that out—at least without more data than we now possess.

Scott Stephenson

Scott G. Stephenson is chairman, president, and chief executive officer of Verisk Analytics.