By Keith Bunnell, Global Head of Data Management Services, Bloomberg.
Information has always been the lifeblood of the financial industry. A money manager with more data that provides real insights will have an edge over its competitors. That isn’t new. What is new is the amount of data and the types of data that are available. In addition to traditional financial reports, a money manager can now leverage datasets that shed light on an infinite number of alternative information sources, including ESG practices, regulatory compliance and supply chains.
Investors today also pore over reams of alternative economic data – everything from credit card receipts to power usage to port traffic – to get a more complete picture of economic activity around the world. As technology advances, smart analysts will find even more information to process.
That new data comes with advantages and challenges. For one, it has to be joined together with existing datasets before it can be used, to ensure it is being fully considered in the larger market and economic context. Many large corporations have the kind of robust data management systems to handle that job, but small and mid-sized financial firms often do not. Building out those systems will allow those firms to stay competitive with larger rivals.
Data management systems perform critical functions: they help companies bring in data from multiple vendors, clean it, link it together and make it available across the organization – from research functions to trading to risk management to accounting.
Without a proper data management system in place, companies will face a host of problems. They may spend money buying duplicate datasets, waste time and money trying to aggregate their data, and struggle to onboard some of the new data that is becoming available. Getting data quickly and stitching it together with other information will be critical to success.
Sustainable investing, which has risen to become a significant focus for investors, offers a case study in the challenges financial firms confront in making sense of all the new data that is being produced. New ESG data vendors are constantly entering the field. It would not be uncommon for a firm to buy data from five or six different ESG vendors. Some produce scores and metrics for corporations and the numbers often do not match up. Others are using new technology, such as satellite imagery, to track destruction of the rain forest or the environmental impact of mining operations.
Financial firms need to put all these pieces together and assemble a mosaic that tells a consistent story. But before they can do that, they need to be able to see all that data in one place on a platform that brings everything together. That is where the data management system comes in. It doesn’t make the decision, but rather, it gives the decision makers the tools they need to do the job easily and effectively.
Companies of all sizes need a data management system that is future-proofed, flexible, and agile enough to keep up with the rapid pace of change.
Small and mid-sized firms contemplating an upgrade could try to manage the project themselves, but the undertaking is a formidable one, especially with the proliferation of vendors and datasets. It can be expensive and require technical skills that the firms don’t have. The alternative is to turn to an outside company with expertise in data management.
That turnkey operator has the experience and technical skills to solve the problem and can make the necessary investments in hardware and software. That same operator can provide vital services such as acquiring, linking and distributing data, as well as monitoring the data supply chain and alerting customers to potential problems. It is a long list of responsibilities, and it is one most firms would prefer to leave to an experienced and trusted data management partner.
Finance is a business where small and mid-sized companies have always found a way to succeed on the strength of their know-how and insights. Those firms still can if they have flexible data management solutions which will let them keep pace with rapidly changing data requirements. The time to get those capabilities is now.