Raising the Data Management Stakes
Data has always been the lifeblood of financial services. Despite the focus on trading floors, algorithms, mobile banking, and high-frequency trading, no business line in the industry could run without access to data.
Though retail banking is certainly dependent on data, it still has tangible products -- bank branches, tellers, ATMs, and cash transactions. But the capital markets and investment management segments of financial services are truly data-driven businesses from start to finish.
Portfolio managers need data to calculate values and look for investment opportunities. Traders need clean and fast market data to identify trading opportunities. Investment bankers need data to valuate deals. In short, all these business lines would take on a lot more risk if the data led to the incorrect decision.
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The reliance on data is one of the reasons the industry has done such a good job and at the same time such a bad job managing data over the years. With every part of the business relying on data, capital markets basically created the data management discipline a few decades ago. Today many firms have a chief data officer (CDO), who runs a company's data management organization. There are methodologies and best practices built around managing data in the most efficient way.
That said, business demands and corporate culture have led to a lot of data management fragmentation and divergence from best practices. Though firms often knew what they should do to manage data, everyday business challenges often had data managers settling for less-than-ideal data management plans. These plans often created multiple data replicas and inefficiencies. Most large organizations have multiple copies of data, as each business unit requires a unique version, resulting in replicas that are costly to maintain.
Today, however, regulators look to data managers to do more to help improve risk reporting. The Basel Committee on Banking Supervision has issued BCBS 239, a directive on what's commonly known as risk data aggregation. RDA requires banks to report risk from across the company. The goal is to increase transparency into a bank's financial well-being to help regulators identify firms that could harm the global economy if they ran into economic trouble.
[For more on BCBS 239, read: 8 Things You Probably Don't Know About BCBS 239.]
John Bottega, a longtime financial services CDO, calls BCBS 239 "the data management manifesto." For data management professionals, the new regulation is not only validation for the work they have been doing, but also a call to take data management to the next level. By all accounts, meeting the new RDA requirements is a tough task, but it seems like one that data managers are eager to tackle.Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio