Banks are seeing the cost of fixing data issues rise significantly. Whether a direct expense to build integration capabilities to deal with aging technology, or indirect when regulators or auditors find data issues and assess civil money penalties, the impact is real and business leaders are taking notice.
The Data Hangover
Eight years after the financial crisis, institutions are still dealing with the hangover and the issues that contributed to the severity of the crisis. The lack of data quality and controls were a key contributing factor that exacerbated the impact of the crisis. Incomplete, inaccurate, or untimely data meant that institutions did not have a complete picture of their inherent risk in terms of debt, leverage, or exposure. Lack of controls further aggravated the already perilous situation since institutions were not provided timely alerts regarding the state of their data. As a result, regulatory authorities across the globe have mandated several measures focused on risk management, data governance, and reporting. Large institutions have a direct requirement to comply with these mandates, while smaller institutions can use these mandates to improve their processes and controls.
As institutions undertake regulatory compliance going forward, there is a realization that data is not only needed for crisis response but also as a critical business asset used in modeling, reporting, monitoring, and trend analysis, and ultimately for corporate and strategic planning. For this to happen, there needs to be a fundamental shift in corporate culture, where data can be used to drive business growth and expansion, rather than as simply a reactive tool. To this end, data governance is key to the management of data as an institutional asset.
A strong data management framework really starts with a strong data governance base to set the tone for what an institution wants or needs to achieve from its data management program. Governance establishes ownership, stewardship, and operational structures to ensure that data is managed as a critical asset. Successful adoption of data governance can unlock business value that can drive competitive advantage.
Joseph Sergienko, director at Guidehouse's Financial Services Advisory and Compliance segment shares how a robust data governance framework that sets the strategy and purpose for the data is key to spending efficiently and realizing return on investment.
As institutions undertake regulatory compliance going forward, there is a realization that data is not only needed for crisis response but also as a critical business asset used in modeling, reporting, monitoring, and trend analysis, and ultimately for corporate and strategic planning.