A shortfall in budgets and an excess of regulations are financial institutions’ biggest reference data management challenges and they are not likely to ease with any speed as firms tackle ongoing needs to increase efficiency, reduce costs, meet regulatory requirements and improve data governance and risk management.
AIM Software’s ninth global reference data management survey, entitled Data Under Pressure – Meeting the New Operational Imperatives and sponsored by SIX Financial Information and A-Team Group, outlines the data management challenges of reference data, as well as drivers of change and expected areas of investment over the next two years. The survey was conducted in the first half of this year among 106 financial institutions located in 24 countries.
The key challenges cited by survey respondents were accessing budgets and meeting regulations, results that suggest regulatory compliance programmes capture many of the resources available and often compete with other data management initiatives. This is reflected in the drivers for investment in reference data management that show regulatory requirements increasing in importance compared to last year, along with increased efficiency and data governance. Cost reductions have ceded the top slot in terms of importance for investment to increased efficiency.
Over the next two years, investment in reference data management is expected to focus on extending existing systems, with 67% of survey respondents saying this is where their companies will invest. Some 26% will invest to centralise reference data on a single platform, while 22% plan to replace exiting systems with more modern technology, 11% plan to outsource data operations and 6% intend to use hosted solutions.
Specific areas of reference data noted for investment and automation include, in order of importance to the survey participants, securities data, corporate actions data, price data and legal entity data.
Reflecting firms’ concerns about regulations and investments that are being made in compliance, the survey found 52% of participants naming Basel III, and particularly BCBS 239, as the main regulatory challenge driving investment in reference data management solutions. FATCA came in second, followed by MiFID II, Dodd-Frank, Solvency II, UCITS IV and Financial Transaction Tax.
On the issue of regulation, Olivier Kenji Mathurin, head of product marketing at AIM Software and leader of the AIM Research Lab that carried out the survey, says: “Regulations such as BCBS 239 and MiFID II provide opportunities to implement meaningful changes at group level. In the area of enterprise data management, business applications gain momentum rapidly because they address the new operational imperatives and improve the business case for investment compared to traditional approaches based on tools and custom developments.”
Addressing the build or buy question, the AIM survey found 51% of firms using only commercial solutions, 34% using only in-house systems, and 9% using a combination of commercial and in-house systems. Commercial solutions are used to a greater extent to manage market date and price data, as well as for opening instruments, and to a lesser extent to manage corporate actions, legal entity and fund data.
Data vendor solutions finding favour in the back office include Bloomberg Data License, Bloomberg Professional service, SIX Financial Information’s Valordata Feed, Interactive Data products and Thomson Reuters DataScope, but none are perfect with survey respondents identifying the problems of vendor data as high cost, poor data quality, missing data, poor data coverage and delays in data delivery.