Prioritizing Capital Markets Data Management: Should We Be Concerned?
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I read the Enterprise Data Management Council’s (EDMC) 2015 Data Management Industry Benchmark Report with great interest and am not sure if I should be encouraged or worried. I am encouraged because the study was well done, and the report was chock full of great insight into the progress of important data management initiatives in our financial institutions. However, I am also concerned that the inability of industry leaders to effectively communicate the importance of data management initiatives to all constituents will inhibit the ability of our financial institutions to execute on their strategic priorities.
A Historically Low Priority IT Activity
I was involved in data management in the 1980s and 1990s as a technology executive for investment banks, and I believe that data management—at the time a function of the technology department—was viewed as a low priority among industry management. A lot has changed since then to raise the importance of data management, most obviously the damage of the 2008 credit crisis and the stifling regulation that has resulted from it. Now that I’m at Dun & Bradstreet, the leading provider of commercial data, I surely see progress.
Dun & Bradstreet
The EDMC report indicates that data management has “gained a strong and sustainable foothold” in the industry and that “data is … essential in order to facilitate process automation, support financial engineering and enhance analytical capabilities.”
Capital markets institutions have made undeniable improvements—such as building faster and better models for decision making, deploying highly intelligent trading algorithms and reducing trade breaks and fails—that have elevated their business. But adoption of reference data for enhanced insights has not made a prominent impact in this growth, in large part because it has not gained prominence in these institutions.
Data management historically has resided in organizational technology silos, which greatly inhibits the collaboration that is required to maximize the benefit from analysis of the complex concepts of reference data. Ownership of reference data has not been fully integrated into operational processes. More importantly, it has not been sufficiently evangelized and its value not articulated as part of an overall strategy.
Time to Spread the Data Management Gospel
The report calls it spreading “the data management gospel.” Indeed, the successful integration of data management into a corporate or enterprise function will surely improve acceptance and adoption. As the report states, “Stakeholder buy-in increases significantly and resource satisfaction is highest in those circumstances.”
Two things will get us to data management adoption:
One is for management to spread the word. Resources need to hear—and believe—that data management is a priority. In the past, it’s been given lip service and has then predictably faded in the shadow of the latest trading technology or low-latency market data solution, or has given way under the weight of unending regulatory mandates. As a result, because so many have heard it repeatedly, it is natural for them to greet statements about the importance of data management with a skewed eye.
Indeed, the EDMC report confirms such, saying that while the industry has a sufficient level of resources ready, the industry has a low level of satisfaction with support for data management initiatives, and refers to the industry’s tendency to “‘haircut’ data management program resources for other operational activities.”
The industry’s experience leads to its struggle today to get sufficient resources to meet objectives. Of course, when financial institutions now need to become smarter in their knowledge of the market, this lack of commitment and resulting resource shortfall is seen as a primary cause.
Organizations such as the EDM Council itself have already benefitted from the progress of this communication, generating consistent dialogue on the most important initiatives while offering a platform for executives to share their ideas for the best solutions.
So that’s where the second thing comes in — secondary drivers. Financial institutions are rapidly recognizing the value of data management for the processing part of the business. The EDMC report states that operational efficiency is cited by 68% of respondents as being a significant benefit while business value/analytics is noted by 46%. With reducing operations and processing costs being such an important part of capital markets’ strategy (supported by such initiatives as reducing the settlement cycle and investigation of distributed ledger solutions), the ability to improve efficiency will raise data management to the level it needs to attract resources.
Say It Like You Mean It
However, as the leaders of financial institutions adopt these tenets, their challenge lies in communication to others in this business. No longer can capital markets afford another “false start” and more lip service to the importance of data management. In its introduction, the EDMC report accurately states:
“There is no getting around the inherent difficulties associated with either altering organizational behavior or managing wholesale transformation of the data content infrastructure. And while the challenges are real, the global financial industry has clearly taken a giant step closer to achieving a data management control environment.”
It is indeed a daunting task and one that has been central to the jobs of data executives for decades.
Further, I agree completely with the report’s statement that, “we would expect to see the importance of communication clearly articulated as part of data management strategy and various approaches being created to ‘spread the data management gospel.”
This means that organizations such as SIFMA, the FISD and the EDMC itself, as well as the individual institutions and data providers like Dun & Bradstreet, should firm up our dialogue for communication with everyone in the industry. This will pave the way for sufficient resource dedication to address the data management problem.
We’ve been hearing for years about the importance of data management and have witnessed its steady, if still slow, progress to becoming a prominent business initiative.
Now it’s time for executives to make the biggest push yet to attract the resources required to execute on this strategy.
Read the full report here: 2015 Data Management Industry Benchmark Report