Radical thinking on industry business models is needed in such disastrous times, proselytised Avox’s Ken Price at FIMA this morning. He suggests turning the traditional ‘user in the middle sources multiple vendors’ model on its head so that the users, who after all generate most of the data themselves, become the centre of the model and work alongside vendors and other bodies such as tax authorities, registration authorities, and regulators and more. “There’s a huge amount of power in collaboration,” he said.
Highlighting the value that users already have, and that he suggests can be realised through working through vendors such as Avox, Price says that 70% of changes that are made to the Avox database are triggered by feedback from its clients. He acknowledges that many institutions remain uncomfortable with such an approach, but suggests it is a valid approach to addressing data problems.
“What we’re doing here is preventative maintenance. What is the cost of incorrect data if you do not do this?” he questioned. Citing a client example, the client could not correctly identify the risk level associated with any of its own clients resulting in the regulators insisting those clients were categorised as high risk. The implication was that the firm had to increase the capital withheld for potential losses associated with those clients, to the tune of £10 billion. By then addressing the data and risk classifications of its clients this capital was freed up, enabling the firm to invest elsewhere. “The £10 billion number was directly linked to data management by our client,” said Price.
Also, quoting from a recent study commissioned by Avox majority shareholder Deutsche Borse, the average risk event cost has been calculated to be $20 per event. In the banking sector there have been 90 such recorded events and 45 in the brokerage sector in the course of the year. At this level, the suggested budget that should be put aside to cover the losses stemming from these events is $4 million per year.
By addressing data management in a more radical way, and harnessing the power of the users’ own data through collaboration, the significant benefits of improved quality, reduced cost and increased flexibility can then be realised, said Price.