Fragmented data management processes have become one of the most pressing concerns for financial firms, amid increased regulatory requirements and
hefty penalties for related failings.
Together with risk management obligations, regulation is proving to be the driving force for investment in data management solutions, according to research by Aite Group, an independent research and advisory firm focused on the financial services industry.
The research found that 80% of respondents believe global over-the-counter (OTC) derivatives regulation and the Foreign Account Tax Compliance Act (FATCA) pose the greatest operational challenges for data management processes, due to the numerous checks and classifications that need to be applied.
Current data management processes are perceived as fragmented and immature, with and over-reliance on manual onboarding processes. Over two thirds (69%) of firms named data quality and the need for better defined governance processes for data management as the most important factors when meeting investor transparency and regulatory reporting obligations.
More than half of the firms expressed concerns about their existing data management processes when planning for the Markets in Financial Markets Infrastructure Directive II and the Market Abuse Directive II, which will require firms to store and report the legal entity data underlying their trades.
Ron Jordan, chief data officer for The Depository Trust & Clearing Corporation (DTCC), which commissioned the research, says: “Siloed and legacy data management systems have created challenges around data quality and governance, which could prevent firms from meeting regulatory requirements and lead to penalties, loss of business and reputational damage.”
He adds that the DTCC, the post-trade market infrastructure for the global financial services industry, sees the increasing costs related to poor data management as a significant and growing concern for firms.
Virginie O’Shea, author of the Aite Group research, says that smoother and more efficient processes are the next step. “There is an increasing focus on streamlining processes that can support legal entity data in a holistic way, from client onboarding all the way through to settlement processing,” she says.
For the research, published under the title of Putting the client at the center: changing dynamics in client onboarding and data management, Aite Group surveyed 23 market participants, including asset managers, third-party administrators and investment banks, across 16 financial institutions based in the US and Europe.
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