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Becca Lipman
Becca Lipman
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The Sentient Enterprise: Data Driven as a Strategy, Not a Tactic

Can capital markets take a tip from front-to-back-office customer execution efficiencies and apply it to the investment process?

In the last few years, the idea of a sentient enterprise has taken hold -- a corporation whose parts are so intimately connected they are essentially a single, very powerful entity. As a result, trading desks achieve operational alpha, moving efficiencies from the front office throughout the middle and back. It's the big data dream.

A sentient organization harnesses real-time capabilities, social information, applications, and artificial intelligence to advance the overall organization. In financial services, the closest we might find is a sentient front office, where all resources are connected to streamline trade efficiencies.

[Read: Wall Street Seeks Edge From Operational Alpha.]

But what if banks, which are already exceptional at algorithms, took that competency from the front office, set up a center of excellence, and pushed capability throughout the middle and back office?

Sean O'Dowd, global director of capital markets at Teradata, said in an interview at the Partners 2014 conference that financial firms are becoming obsessed with operational alpha through the trade lifecycle. He thinks centers of excellence could be one angle to prop that up.

Creating a center of excellence is a way to soak the enterprise's intellectual property into the network, rather than letting it walk out the doors each night, he said. This is especially important for large custodial banks, which just throw bodies at accounting and transactions. Employees are just pushing buttons, and these institutions are trying to figure out how to automate that human decision-making process.

"Nobody's doing it that I'm aware of. It would be interesting to see." If companies are interested or trying to do this, a good path may be to examine the success of Nationwide Insurance, which has strategized for years to deliver data consistency at every level of the organization for better customer service. "They were feeling a lot of that pain and wanted to accomplish the same things."

Though financial services fims are less customer focused and more process focused, artificial intelligence is a key component to building a sentient organization. Instead of asking how to improve customer experience, O'Dowd said, we can ask how to bring that execution to the quants, tweak it, and help institutional traders on the sell side move that theme closer to the investment process. Then firms can then work to push that down for operational alpha.

"Financials could really crack the code on the operational process by turning that out," O'Dowd said. He suggested that firms are using AI to improve customer service, "but financials can take a page from that playbook and apply it for algorithmic use cases within the investment bank."

Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio
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