Wednesday, November 12, 2008

Data management projects still a hard sell

Front office trading applications and risk management have garnered a lot of media attention during the recent credit crunch. But one ingredient that feeds both front office trading applications and risk management, data, which is the "lifeblood" of most companies, is still getting short shrift when it comes to funding.

Data governance and quality should be right up there on the list of things that financial service providers need to work on because if they are taking in poor quality data then they are going to be spitting out poor trading and risk management decisions based on erroneous data.

But it seems data management in general is not at the top of most banking CEO and CFO's agenda, at least that is the impression I got sitting in on a panel discussion on the funding process for data management in a turbulent financial market at FIMA Europe 2008 in Olympia, London.

While most companies recognize that data is a "strategic asset", getting funding for data management projects appears to be as difficult as pulling teeth, according to the esteemed panel of EDM, client and customer accounts operations heads from Citi, HSBC and Dresdner Kleinwort.

And while the credit crunch has shone a light onto the once mysterious backwater of reference data management - regulators are likely to start enforcing standards around data quality and management - data specialists do not expect funding for major reference data projects to get easier any time soon.

"It is difficult to get management buy-in [when it comes to data management]," said Sally Hinds, global head of EDM, HSBC investment bank. One trick, said Hind was to ask for the same budget as 2007 so it didn't look like reference data management was gobbling up even more of increasingly scarce budget resources.

Hinds stressed that the EDM department within HSBC was relatively new and that the recent global market turmoil highlighted that data still resided in many different, often siloed locations, and that sometimes there were mismatches between front and back office views of data.

"Citi is incredibly siloed," said Julia Sutton, global head, customer accounts operations for Citi. "We are trying to break down these silos, but it is difficult." Sutton said as her function was placed within the capital markets division of the bank it was viewed with mistrust by other business lines. And whilst her business has senior management buy-in, she said there has been a major influx of new management recently. "They haven't been there long enough to know how important it[customer data] is to them," she said.

Sutton said her department had to try various methods in order to get funded. In the end instead of getting funding from the individual business lines, they obtained funding centrally as the customer data it manages crosses various business lines including global banking, investment banking and treasury.

Instead of managing data in silos, enterprise data management or EDM, encourages firms to move to an enterprise-wide data management fabric. But it appears that the reality on the ground for most firms is still very much silo-based. "We have a long history of acquisition, but a short history of integration," said Sutton. Hinds of HSBC said it is working on a project called, "one HSBC", which aims to reduce [data] duplication across asset management, investment and private banking.

Sadly it seems, the only thing that seems to truly motivate most banks to embark on major reference data management projects is the threat of regulatory oversight. Most of the panelists agreed that regulations such as Basel II and MiFID had provided them with opportunities to get projects funded.

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