Know Your Customer " Through Better Data Management

FTI offers a reference data management solution, based on the principle of a centralized repository, which significantly reduces exceptions by eliminating reference data inconsistency, especially across the firm.

The converging influences of aging legacy systems, globalization, competition, internal cost pressures, the need to reduce settlement times, and a minefield of new regulatory requirements such as Basel II and Sarbanes-Oxley, are acting as key catalysts for a re-engineering of the back offices of investment and securities firms.

We all know that reference data is the backbone of the trade process cycle and several prominent industry surveys trace the remaining cause of high and costly exception levels back to inconsistent reference data. Further complicating the situation is the disparate environment in which reference data is maintained. Different systems are often used to store the same reference data for various front and back offices.

What exacerbates all this is that there is almost never one central data repository for all types of reference information such as customer data or securities data, and relationships related to both. Would the world of exceptions, and indeed customer relationship management not be a better place if there existed a data model on which the reference data sits that can marry up all customer data, securities data, and all participant parties to transactions and their roles, or relationships pertaining to a transaction from a single source?

The Need for Real-Time Reference Data

When reference data is not available, in near real-time, to the systems that need it, the exceptions generated for trade confirms, front-back office integration or failed settlements and payments increase dramatically. The task of keeping reference data clean and synchronized within those systems that need it is the single largest cause of exceptions in trade. The time spent dealing with these exceptions escalates operations costs.

FTI offers a reference data management solution, StreetReference, based on the principle of a centralized repository, which significantly reduces exceptions by eliminating reference data inconsistency, especially across the firm. Using the leading industry data model, business rules engines and flexible publishing and reporting tools provides a data integration strategy that can substantially reduce costs and offer a framework for achieving STP.

Compliance " The Need for Risk Assessment

Several key regulatory drivers are forcing the pace of data centralization and consolidation across many firms, especially those who recognize their response to compliance as a means to remain competitive. The U.S. Patriot Act, Sarbanes-Oxley and Basel II all impose strict demands on firms for historic firm-wide data. Today, much of this data is likely spread across multiple databases in multiple formats. Creating a centralized information capability to mitigate the growing financial and accounting anxiety exerted by regulators is the way forward.

Several forward-thinking companies have created a vision where they have one source for all enterprise- wide information no matter what level within the organization is requesting the information. The emerging climate of management accountability for corporate failure to respect shareholders and customers is spawning measures to improve the access and use of information relating to customers and business transactions.

Those organizations that achieve this goal will have more credibility in their financial statements, more control over their internal processes and more insight into their strengths and weaknesses. In the longer term it will even bring strong financial gains.

Customer Awareness " The Need for 360 Enterprise View

A prime driver in some leading firms is the ability to expand revenues with existing clients. Increasingly, firms will need to be able to determine the total revenue generated by one client " on a holistic basis encompassing the total firm view " which includes business conducted across different product lines and different business units.

To be meaningful in a risk evaluation context or a sales generation context the view needs to accommodate transaction details across the client's multiple subsidiaries, as well as the financial firm's own different business units or subsidiaries. Knowing how much existing revenue each client generates can be compelling when negotiating with the client to extend the business relationship. Equally, awareness of the total profit margin generated from that client will provide internal ammunition when determining how the additional business relationship should be priced. The effect on competitive differentiation is obvious.

Customer data integration is only the first challenge. Data needs to be turned into customer understanding and the resulting insights fed back into the business process. Profitability defines business success, and knowing the degree of interaction with every customer directly impacts a firm's ability to succeed. The degree of interaction measures across both the revenue generated and costs incurred spectrums. To understand the profitability of a relationship requires both aggregating firm-wide revenue, and also understanding all of the costs associated with generating that revenue. A high-value repeat business customer can increase profitability while a less valuable, high-maintenance customer can become a financial burden. Knowing enough about a customer, including all business tentacles is the key to a firm recognizing the full scale of profitability or exposure.

There is a need for greater information integration to develop a clear understanding and correlation to customers and their ultimate corporate relationships across an enterprise. The need for consolidation and integration within a firm's operating environment is growing in response to competitive pressures, regulatory requirements and customer demands. A customer reference data solution based on an industry leading extendible data model is the solution. Ultimately, this integration and expansion will contribute to the breaking down of business stovepipes at a systems level.

Through its StreetEnterprise solutions, FTI delivers a single operating platform and a complete suite of integrated enterprise applications including reference data management (StreetReference), portfolio accounting (StreetBooks), transaction management (StreetDirector) and corporate actions processing (StreetActions). With access to real-time consolidated information, firms can raise the level of real-time financial control over their business to reduce operations costs and improve risk.

Financial Technologies International
22 Cortlandt Street
New York, NY 10007
Contact: John Hysinger
212-798-7196
[email protected]
www.ftisoft.com