Risk Management

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Tim Lind
Tim Lind
Commentary
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Innovative Risk Management: How To Really Leverage Legal Entity Data

As the industry debates regulatory reform and the course toward greater transparency and stability, we are entering a new phase in the evolution of financial data and a potential renaissance in the approach to risk management, writes Tim Lind, global head of legal entity content at Thomson Reuters.

The Pivotal Role of Legal Entity

Legal entity has a critical role to play in linking value added information together. This will promote the development of innovative content packages and analytics to support specific business processes such as client on-boarding, portfolio compliance, risk management, customer relationship management, and investment decision support.

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It starts with a clear vision of hierarchies and relationships but the opportunity to link value-added content based on this entity-specific model is far-reaching and significant. For example:

  • Fundamental and historical financial data and research on securities
  • Evaluated pricing for OTC instruments, structured products, and loans.
  • Data to screen entities for client on-boarding, KYC, and AML, to determine risk of sanctioned by regulators or governments and potential reputational risk.
  • Credit analytics and operational metrics.
  • Linking funds to fund management companies, trustees, transfer agents, and custodians.
  • People are a huge part of the legal entity equation – officers, directors, analysts, traders, portfolio managers, politically exposed persons – and how they are linked to entities.
  • Ownership structures of private companies.
  • Sentiment indices compiled from aggregated transaction data sources from industry utilities.
  • Tracking M&A activities, deals, and changes in corporate structure.
  • Linking news and real time events as they happen.
  • Lawsuits, patents, and other legal filings.
  • Supply chain risks including ownership details, environmental compliance, political risks, and geographical risk.
  • Third-party content and analytics.
  • The value comes from being able to link data sets that were previously siloed and from creating common semantics between data sets, establishing reliable cross-referencing methodologies between regulatory taxonomies, and offering links to standard symbologies like Legal Entity Identifiers. The goal is to provide a standardized delivery platform to navigate, visualize, and access the connections. An entity-centric approach will give users a 360-degree view of risk exposure, enabling institutions to untangle the complex dimensions of modern business entities and hierarchies.

    The future of the market data industry is open, not closed. Open means the ability to access the broadest variety of data and integrate content into the workflow of business applications with a minimal amount of friction. Open means freedom of choice on platforms and independent and neutral technology to manage data from content suppliers. Open means the elimination of proprietary lock-ins and standards.

    Market data providers ultimately will be judged on their ability to link to and coordinate the widest variety of content available, to make it consistent, and to be able to deliver it through open platforms.

    We believe it is the role of financial information providers like Thomson Reuters to leverage the legal entity as the foundation to link value added information together. Legal entity data will play a pivotal role for forward-looking institutions looking for innovation in risk management and an edge in the marketplace.

    Tim Lind is global head of legal entity content, Thomson Reuters, where he is responsible for driving continued growth in the firm’s content business related to reference data, corporate actions, and legal entity. Throughout his more than 20 years of experience domestic and international experience in the securities industry, his particular focus has been on the strategic deployment of technology to manage data, transaction processing and risk management.

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