Firms Fumble to Manage Market Data
If your firm is having difficulty managing its tremendous influx of data, you're not alone.
According to a TowerGroup survey, less than 5 percent of firm's surveyed indicated a heavily automated data environment and 79 percent admitted that inconsistent, inaccurate and incomplete reference data is the major cause of internal STP failure within their organization. Firms had an average of 43 systems containing client and counter-party data and 37 systems containing securities data. That's a large number of systems meaning much work lies ahead if institutions plan to centralize this data or make sure it is consistent enterprise-wide.
Larry Tabb, senior adviser at TowerGroup, says, "Reference data has become a tremendous priority. Sixty-two percent of all firms are saying it is a top or high priority and 72 percent of brokers characterize it as such."
The study also found that about 50 percent of financial-services firms say data integration and standardization costs will exceed $1 million, with 20 percent saying it will exceed $10 million.
High Hopes For XBRL
XBRL, the XML-based standard for business reporting, is expected to catch on in the coming year as cost savings drive industry adoption.
XBRL, the XML-based business-reporting language, is poised for widespread adoption in 2003, according to Paul Penler, principal at Ernst & Young and vice chair of the U.S. XBRL Consortium.
The standard, which covers reporting of financial statements, tax return and regulatory reports with aggregated financial information will help data flow through the market, saving time and money, says Penler.
Penler explains that XBRL has been in the pioneering stage over this past year, with about a dozen organizations already using the standard. But the coming year will see greater adoption and implementation as firms and vendors XBRL-enable their delivery and use of financial information.
"Our goal is, by the end of 2003, to get at least 75 percent coverage within the top 15 to 20 financial-reporting packages," he says.
He adds that several vendors of enterprise-resource-planning and general-ledger software, such as SAP, have already XBRL-enabled their products, but many more still have work to do. Larger participants, such as Deutsche Bank, Bank of America and the FDIC are already piloting their own XBRL-enabled technology.
He adds that the FDIC has estimated saving 20 to 30 percent by moving to XBRL-based reporting. Deutsche Bank has also estimated saving 100,000 man-hours per year through XBRL-enablement.
In addition to cost savings, Penler says that new guidelines from regulators, such as the Securities and Exchange Commission and the Accounting Oversight Board, are also accelerating the adoption of XBRL. These regulators want to see the amount of time that companies take to file reports, such as 10Ks and 10Qs, reduced.