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Regulation and Risk Management Both Helping and Hindering the Data Management Cause, Say RDR Readers

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Although many vendors are claiming that the global regulatory overhaul and a renewed focus on risk management practices within financial institutions have lent weight to the data management cause, it seems that they have also proved to be a hindrance. According to the latest Reference Data Review reader poll, half of respondents feel the developments have had a negative impact on their ability to get funding for data management projects this year.

However, the other half reckons the market environment has proved to be a positive influence on the space by encouraging either tactical or strategic investment in data management. This readership contingent was equally split over whether compliance and risk requirements had resulted in strategic or tactical investments.

Undoubtedly, downward pressure on budgets has caused many firms to clamp down on spending on projects that are not deemed to be mandatory. Perhaps this accounts for the half of respondent firms that have been forced to slam the window on data management projects in favour of regulatory compliance measures or the rollout of new risk management systems?

On the other hand, the other half of respondents may be instead gaining traction with their senior management by using metrics such as risk management and compliance against which to measure the success of their data management projects. Regulatory change around derivatives and pricing transparency certainly merit investment in areas such as valuations data feeds and pricing data management project implementations on the tactical end of the spectrum.

The regulatory focus on punishing those with significant underlying reference data issues will also add impetus to the data management cause in the long run. If the UK Financial Services Authority (FSA) can fine Barclays £2.45 million for transaction errors related to underlying reference data issues, then banks have been forewarned that the watchful eye of the regulator is focused on the data details. The regulatory community is therefore well aware of the fundamental need for accurate reference data to support all other financial services activities.

High profile proposals such as those by the lobbyists for US National Institute of Finance (NIF) and the European Central Bank (ECB) on utilities in the reference data space will add yet more fuel to this fire. Even if they never see the light of day, these proposals and any industry discussion around them will help in raising the profile of data management in the financial industry as a whole.

Perhaps, once the dust has settled following the completion the regulatory reform measures that are on the cards in the near future, those data managers being challenged by compliance and risk management costs may be able to turn the changes to their advantage. After all, greater transparency and regulatory oversight will likely throw data inaccuracies into the spotlight.

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