Risk management consultancy, InteDelta, and financial data management solutions provider, Asset Control, today announce the findings of a survey analysing the data management implications of risk management within banks.
The survey, which saw 13 banks interviewed between late 2015 and early 2016, including investment banks, and large and small regional banks from across the globe, highlights the challenges that banks are facing, driven by both internal and regulatory factors.
In terms of the drivers for – and direction of – change, some of the key findings include:
· Regulatory driven reasons far outweigh any internal reasons as a motivator for change in data management: for 85% of banks, regulation, including BCBS 239 and FRTB, is a ‘highly significant’ driver for change. By comparison, whilst internal motivators involve improving efficiency, reducing risk and increasing independence, only 31% of organisations cite these as ‘highly significant’.
· There is a clear pattern of movement across banks as a whole from a siloed approach to data management to one that is centralised: none of the surveyed banks meet the criteria for the two most centralised categories at present, although, when their centralisation programmes are complete, 31% of banks will fall into these categories.
· The ‘gold standard’ to which banks are aspiring is maximum centralisation, with recognition that total centralisation may not be practical. This is in terms of either affecting risk management’s independence from the business or where organisational structures may be too complex.
· In terms of the specific impact of different regulations, the survey highlighted that FRTB in particular is expected to place a significant burden on banks’ data management capabilities as it requires the collection and processing of considerably more data than the existing calculation framework.
Michael Bryant, Managing Director, InteDelta, comments: “No area of banking has been so transformed in recent years as risk management, and the industry’s management of data in particular has had to adapt swiftly to a fast-changing environment. In conducting this survey on behalf of Asset Control, we set out to understand how internal and external risk management drivers are impacting data management processes and systems. Many banks are now reacting strategically to the implementation of regulatory change by moving to a complete reorganisation of their data management function.”
According to those surveyed, the drive towards centralised data management also goes hand-in-hand with the implementation of Enterprise Data Management (EDM) solutions, with 75% of banks aiming for a high degree of centralisation looking to implement EDM.
This also supports one of the key goals of a data management function – to achieve high quality data; something emphasised by regulation such as BCBS 239 in particular.
Martijn Groot, VP Product Management, Asset Control, adds:
“Data management is an integral part of the risk management process, and as the latter has changed, so has the former. This trend looks set to continue into the foreseeable future, as this research highlights.”
“With the increasing complexity within data management, driven both through regulation and internal considerations, the importance of data quality and clear processes is also set to increase. This is where EDM truly comes into its own.”