“I’m not sure” is not what you want to hear when you’re about to make a costly business decision. Yet, if you’re relying on third-party data, that’s exactly what you’ll get. A gamble based on information that’s incomplete, outdated, or just plain wrong.
How can you make sure your decisions are built on facts? The answer is simple: go straight to the source. We’ll be exploring the first of OpenCorporates’ Legal-Entity Data Principles (LEDPs). That your foundational data should come from primary sources. By the end we think you’ll agree that the success of your business may very well depend on it.
Why data fails
Let’s start with a cold, hard fact: data isn’t always trustworthy. Often, legal-entity data comes from third-party sources with no clear provenance.
Without accurate data, companies risk everything from poor compliance to financial loss. The LEDPs set out to change how we handle and trust legal-entity data. And it all starts with ensuring the data comes from primary sources.
The power of primary sources
At its core, the first Legal-Entity Data Principle is as simple as it gets. Foundational data should come from primary sources. But what exactly does that mean?
A primary source, in this context, is an authoritative, original provider of information. Think company registries, government records, or official databases. Institutions that issue the data firsthand, rather than through third-party vendors.
Here’s a real-world scenario to illustrate. You’re evaluating potential business partners, and one company looks promising. After some digging, you discover their data is from an outdated third-party database. The details don’t match up, and now you’re questioning the entire deal. That’s what happens when data isn’t pulled from the source — you’re left scrambling for accuracy at the last minute.
Why brand names aren’t enough
Many organisations assume that because data comes from a “trusted” brand, it’s reliable. But opaque curation processes, hidden biases, and restrictive access are rampant. A shiny logo on a provider’s website doesn’t guarantee that their data is precise..
When foundational data comes from a primary source, there’s transparency. You can verify its accuracy and better understand the decision-making processes behind it. This is the benefit that dependable legal-entity data gives you.
Real-world implications
In industries that rely on automation and machine learning, data quality is everything. Training an AI model on faulty legal-entity data is dangerous. Especially for businesses relying on AI for compliance or fraud detection.
Data from primary sources removes much of the guesswork. You know where it came from, how it was gathered, and whether it meets your quality standards.
Compliance, in particular, is a domain where primary-sourced data is essential. Regulatory requirements often demand precise, up-to-date legal-entity data. It’s necessary to verify corporate ownership, prevent money laundering, and assess risk. Using third-party data in these situations can lead to outdated or incorrect information. This is how organisations end up in hot water with regulators.
The Panama Papers leak showed how bad data allows shell companies to evade taxes. If access to primary-sourced data gets easier, these activity may cease to exist. Billions in lost taxes could be saved, and global financial transparency greatly improved.
Action steps
So, what can you do with this information? Here are a few actionable takeaways:
- Push for primary-sourced data: Advocate for sourcing from vendors who only use official registers and government databases. This ensures you’re building on a solid foundation.
- Test your data supply chain: Review your organisation’s data sourcing practices. Are you sure your legal-entity data is coming from reputable, primary sources? If not, it might be time to switch providers.
- Check for data integrity: Use automated tools to verify the accuracy of your data. Regular audits will help ensure that your datasets stay reliable and up-to-date.
- Educate your team: Spread the word about the importance of primary-sourced data. The more your team understands this, the less likely they are to pick third-party sources.
As the demand for trustworthy data grows, so will the demand for primary sources. Expect to see more companies and governments invest in creating open, transparent databases. This will cut out the need for unreliable middlemen.
It’s time to build on concrete, not sand
The importance of reliable data can’t be overstated. By embracing the LEDPs, companies can avoid the pitfalls of unreliable information. Only then can they build their data foundation on solid ground.
Have you encountered issues with unreliable data in your work? Share your experiences in the comments below.
For more information
Learn more about how OpenCorporates’ data can help you understand corporate structures and manage risk. Reach out for a demo or explore our services.
