Complying with regulation has become an increasing burden on the financial world since the financial crash. Post 2008, there has been a drive to reduce systemic risk that has brought with it fresh challenges around managing instrument and corporate entity data. While the processes and guidelines for compliance can be daunting, there is an opportunity for organizations to achieve a real competitive advantage. However, before this can be done, they need to find an enterprise-wide model to manage the mountains of data collected.
One of the primary purposes of regulations such as Dodd-Frank and EU Directives like EMIR is to bring greater stability to the market. Firms are achieving stability by introducing new ways to understand exposure to clients and counterparties and, importantly, manage the risk associated with doing business with each. The adoption of the legal entity identifier (LEI) is central to the accomplishment of this goal. With numerous regulations enforced in different regions, financial institutions are increasingly using LEIs to clearly identify which party pertains to which set of transactions.
For many financial institutions, entity-to-entity relationships being assessed by regulators are hard to keep track of. International firms may have many hundreds of legal entities. A corporate entity can be classified as an "issuer" of securities, a trading "counterparty" and an "institutional customer." How a single corporate entity is represented within different datasets is what leads to the problem. By uniting entity data into a single dataset, the LEI links a single entity to its various roles and identifiers, while making sure that it isn’t duplicated in multiple datasets.
The result for financial firms is a more streamlined system that improves data quality, reduces redundancy, and increases auditability. With this comes the ability for firms to get the most from their data by understanding the interconnected roles and relationships of clients across multiple contexts.
One of the primary benefits of this overview of data is the major competitive advantage as it relates to client on-boarding. An accelerated on-boarding process gives firms a leg up in the ability to win new business as well as retain current clients. With a centralized process that links different data types, the firm can take full advantage of every piece of data, improving business agility and reducing processes that previously may have taken days to a matter of hours.
In addition to faster client on-boarding, the new data management approach allows firms to speed up product launches and expand into new markets more effectively. By equipping the front office with a single view of each entity, they can now more accurately identify opportunities to deliver relevant services to customers through cross-selling and better understand customer profitability.
In this era of regulation, there is an evolution in data management that can revolutionize the way a financial firm sees its data. The old model of data management is quickly becoming obsolete. If firms can sever the ties with outdated approaches, and redeploy technology to better effect, there is a chance for a significant competitive advantage.
In order to achieve this, firms need to take action now by stepping back and reconsidering the bigger picture. At this instant, the technology is available for a firm to take advantage of its data for business uses -- now it’s just a matter of turning data into dollars.Neill Vanlint is head of the company's global sales and client operations and is responsible for spearheading the company's strategic international growth. Based in the company's European headquarters in London, Neill heads up the sales, professional services and account ... View Full Bio