The finance industry generates a tremendous quantity of meaningful information usually referred to as data. This data is generally stored information on product performance, consumer preference, business performance and other business-related patterns.
The analysis of this stored data enables businesses to make key decisions, perform comparative analysis, gain competitive advantages, and explore new market opportunities.
Technological advancements have led the finance industry to move towards the storage of data on digital platforms. Advanced analytical tools have helped financial institutions to constantly analyse data and keep up with key trends.
Data analytics is today a very potent skill and an emerging career opportunity. Those who are willing to make a Career in Financial Analysis or Market Research should deeply understand the topic of data analytics and its role in financial modelling.
What is Data Analytics?
Data analytics refers to the process of scrutinisation and evaluation of stored data to predict market trends and make insightful decisions for better results. It is a scientific process to design and create a detailed framework of data that enables critical thinking and efficient analysis. It helps to make better business predictions which leads to smart decisions.
Benefits of Data Analytics in Business
The valuable insights provided by data analytics can leverage the economy of the market in unconventional ways. Observing past trends of data and keeping an eye on the current trends aids in the formation of various strategic techniques of planning. Let us discuss a few benefits here -
- Understanding market demands - Data analytics gives you real-time information on customer demands, products sold, market supply, and revenue generated, among others. It also shows past market trends that help you to develop an overall understanding of the market.
- Risk analysis - Data analysis enables you to study previous downfalls in the market. By constant analysis of data, you can predict market risks beforehand and thus take prepared actions on time.
- Better decisions - Data analysis keeps you prepared for any situation beforehand. This provides ample time for critical thinking and elaborate evaluation of situations leading to better decisions.
- Strategic planning - Data analysis helps to understand the need of the situation and offers a broader vision to look through. A clear vision enables you to study the market's demands minutely and make strategic plans.
- Effective marketing policies - Knowing the customer's needs enables you to design marketing policies according to your target audience. Using market segmentation techniques and micro-niche advertisements can lead to positive marketing policies.
- Customer satisfaction - Customer satisfaction can become a make-or-break factor for businesses. Data analysis brings awareness to the expectations of customers enabling organisations to provide better products and services.
Types of Data Analytics
Data analytics is majorly categorised into four parts and they are -
Descriptive Data Analytics - Descriptive data analytics studies previous data to understand the factors which lead to success or failure. It looks into past records of sales, marketing approaches, financial operations and other data in order to predict and plan future approaches.
Diagnostic Data Analytics - Diagnostic data analytics studies past records of data to find answers or solutions to current problems. This type of analysis gives great insight into problems and also helps to find patterns in historical events that may turn about the face of the problem at hand.
Predictive Data Analytics - Predictive data analytics allows using data records to calculate the probability of the occurrence of an event. Techniques such as data mining and game theory are used to do this kind of analysis.
Prescriptive Data Analytics- Prescriptive data analytics refers to logical and analytical predictions of situations but doing scientific analysis of data. This enables the decision maker to not only make wise decisions but also state the proper reasoning behind each decision.
Data Analytics for Businesses
- Collect and store the required data - A wide spectrum of data gives a better insight. Collect data on all the necessary fields and store them in an organised manner.
- Use a suitable platform - Various organising tools with both online and cloud options are available today. Choose the most suitable tool to store the data. This data should be easily accessible and available for scrutinisation. Make sure the platform is safe to ensure secured storage of data and avoid any data mishandling or stealing.
- Choose your strategy - Use the data available to create long-term as well as short-term goals for the organisation. Decide upon a strategy to analyse the data. This strategy must have the potential to impart the desired insights for effective market analysis and taking decisions accordingly.
- Being practical - Data analytics shows the market realities and trends which helps the management to stay practical. Data analytics ensures you are in touch with the latest market trends. Based on these trends, you make practical decisions that will undoubtedly lead to high-quality financial modelling.
Role of Data to Study Financial Performance and Financial Markets
With the growing competition in the finance market, data has become the key tool to accelerate financial procedures.
Organisations can take informed decisions, predict risks and plan strategic market policies with the help of data analysis. This improves the financial performance of the organisation and boosts its market growth.
Data analytics is the most powerful tool of this digital era which gives organisations valuable insights to make major financial predictions.
Data records also let financial institutions stay ahead of time by making smart predictions. Thus, data analytics lowers market risks, improves financial performance and has proven its role in the financial markets.
Data analytics is now emerging as a full-fledged career option due to its important role in the finance sector. Technological expertise and analytical skills are the major qualities a data analyst will require to thrive in this industry.
If you are aspiring to build a Career in Financial Analysis and want to upskill yourself with advanced knowledge, consider Imarticus’s Financial Analysis Prodegree in Collaboration with KPMG. This is a certified course of a 120-hour skill-building program where you get to learn directly from industry practitioners.
Visit Imarticus Learning for more information.