About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

A Tower of Babel for Risk Data

Subscribe to our newsletter

There’s nothing better than a good analogy and this week’s JWG organised panel discussion on the topic of funds transfer pricing (FTP) saw one of the banking industry panellists (Chatham House rules prevent me from naming names) come up with a particularly good (if well used) description of the risk data challenge as one in which firms are striving to build a “Tower of Babel”. The panellist spoke about his own firm’s attempts to develop such a structure (bespoke, in-house rather than vendor bought) in order to be able to aggregate data relevant to risk management from across its siloed legacy systems architectures.

The Tower of Babel analogy has been used in a number of different data management contexts of late, not least of which has been by the European Central Bank’s (ECB) statistics division director general Francis Gross to describe a reference data utility, and it seems that firms are keenly aware of the value of an over-arching structure via which to pool vital data components. Enterprise risk management is predicated on the ability to gather these data sets together in a timely fashion and put them through their paces, after all. That was certainly the message repeated by panellists at our own A-Team Insight Exchange events last month.

However, such an endeavour is no mean feat. The panellist at the JWG event indicated his firm has been working on the project for 18 months already and progress has been slow and arduous. This could be partially explained perhaps by the fact the firm has decided to tackle data relating to the hardest instruments first: the derivatives book.

Another panellist at the JWG event added that his team has been focusing its work on the liquidity risk management space since early 2007 and has yet to find a “magic formula”, other than chipping away at the problem. The increased time pressure from regulators for the production of reports has also meant the “machine has had to be streamlined” by considering a simplification of certain data flows, he said.

A vendor panellist noted the need for risk teams to be able to provide their boards, in light of the new governance requirements coming down the pipe from the Basel Committee (see more below), with the “right information” rather than drowning them in raw data. The UK Financial Services Authority’s Prudential Risk Division director Colin Lawrence also discussed the need for aggregated but sufficiently granular data in order for the right level of transparency to be achieved.

In fact, the Basel Committee’s most recent paper on “Principles for enhancing corporate governance” refers directly to this data aggregation challenge for risk management teams in compiling reports for their boards. “In ensuring that the board and senior management are sufficiently informed, management and those responsible for the control functions should strike a balance between communicating information that is accurate and “unfiltered” (ie that does not hide potentially bad news) and not communicating so much extraneous information that the sheer volume of information becomes counterproductive,” states the paper.

As noted by one of the panellists, in order to achieve this, standards for accuracy and completeness of data (otherwise known as a data quality framework) are needed, and fast. That will mean the difference between a Towel of Babble and a Tower of Babel.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Multi-cloud environments – How to maximise data value while keeping on the right side of privacy and security

Multi-cloud environments have much to offer beyond single-vendor cloud setups, including the benefits of access to a variety of best-in-class cloud solutions, opportunities for price optimisation, greater flexibility and scalability, better risk management, and crucially, increased performance and availability. On the downside, multiple cloud vendors in a technology stack can cause complexity, more vulnerabilities, and...

BLOG

Fenergo Combines KYC and Transaction Compliance to Provide Real-Time Customer Intelligence

Fenergo has released KYC & Transaction Compliance, an offering for fintechs – and later financial institutions – that combines the company’s KYC and transaction monitoring solutions to provide a single, integrated SaaS solution that continuously monitors customer profiles and detects suspicious transaction activities, including money laundering and terrorist financing, in real time. KYC & Transaction...

EVENT

Data Management Summit London

Now in its 14th year, the Data Management Summit (DMS) in London brings together the European capital markets enterprise data management community, to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Regulatory Reporting Handbook – First Edition

Welcome to the inaugural edition of A-Team Group’s Regulatory Reporting Handbook, a comprehensive guide to reporting obligations that must be fulfilled by financial institutions on a global basis. The handbook reviews not only the current state of play within the regulatory reporting space, but also looks ahead to identify how institutions should be preparing for...