Solving the Data Puzzle

Date: April 25, 2017

Puzzle Data

SEC Modernization has pushed the fast-forward button on the data management strategy for organizations of all sizes. 

The data requirements, especially for Form N-PORT, which include an increased volume of data and frequency of reporting on that data, have organizations looking at more than just the volume of data they hold on behalf of their clients. While there is great value to that data, it is critical that firms from asset and fund managers to global third-party administrators (TPAs) take seriously the need to implement strategies to harness its power.

This entails not only identifying the appropriate sources from which that data will come, but also the very tools and strategy they will use for data collection, all while synthesizing it into meaningful information, and then finally utilizing it across the enterprise or organization. And this must be done while simultaneously preparing for the monthly reporting that has been thrust upon the industry as part of Form N-PORT.

It begs the question: how do organizations prepare and integrate a global data strategy while at the same time answer regulation that is coming fast and furious? Operational challenges and strategic initiatives are certainly at a crossroads.

The Chief Data Officer

First and foremost, what we are seeing in many financial services organizations is not only the creation of the Chief Data Officer (CDO) role – but often where they already have this role, a shift in how they are intertwined in the company ecosystem. Deloitte spoke about CDOs as part of its 2016 paper titled: The evolving role of the chief data officer in financial services: From marshal and steward to business strategist. Among the critical objectives of the Chief Data Officer that the paper discusses are:

  • Enhancing operational efficiency and reducing associated costs
  • Enhancing risk management
  • Improving regulatory compliance

To me, improving regulatory compliance is a key focus area as organizations, most notably in the TPA sector, need to continue to support and provide the flexibility to meet the needs of new and changing regulations. Today, TPAs are relied on more and more to meet their clients’ needs from a regulatory obligation perspective.

Meeting these needs is increasingly dependent upon having an individual whose core responsibility is to ensure that the data strategy, management and execution is aligned with the market big picture. Having this crucial role allows organizations to best use that large volume of data across the enterprise and to reuse it across required regulations.

Identify Data Sources and Gaps

Identifying their data sources, and just as importantly, their current gaps in that data is critical to firms. From that identification, they must put together a strategy to collect available data, but also to account for the gaps in data – whether that is an actual lack of data or limited capabilities to consume that data. For example, many firms continue to rely on third-party data providers or in some cases, are just now turning to source data such as liquidity and risk – with SEC Modernization bringing this to the forefront.

The gaps in what is referred to as “unstructured data” can and in many cases do, fall outside of the initial scope for an Enterprise Data Management (EDM) solution. Many EDM solutions are designed, built and integrated to consolidate the numerous internal systems and data sources into one central location. That consolidation can then allow for one enterprise level of source data for use across the spectrum of services within a TPA or within the various departments of an asset manager.

User Portals

Many third-party administrators utilize a portal to increase common user experience for their clients. The Chief Data Officer or head of technology, where a CDO is not in place, must consider how to incorporate the data management strategy (which typically includes technology) not only for purposes of access from the portal, but also from the operational perspective of integration into the overall regulatory and compliance process within the organization. Considerations such as level of client interaction, level of internal departmental interaction depending on regulation, revision process procedures, interaction with existing or new third-party technology in use, etc., must all be evaluated when implementing the data strategy.

Internal IT or Third-Party Solutions

The aforementioned concepts need to be considered in conjunction for regulations that are requiring compliance within compressed time frames.  In many instances, IT divisions within these organizations may feel it is in their best interest to incorporate the scope of meeting the regulatory requirements within an existing data management strategy and project. This can lead to over-extending resources or increasing scope exponentially. It also increases the potential for IT to take on regulatory requirements and compliance that may be out of their realm of expertise. Solution evaluations should include taking advantage of third-party technology offerings and key personnel in the overall enterprise data management program.

Third parties can provide regulatory- or compliance-specific software to meet the needs of a regulation which can be incorporated into a TPA portal or an internal asset manager ecosystem. They also allow clients to leverage the proactive monitoring and regulatory/compliance expertise that a technology partner can provide – thus lessening the burden on internal staff.

Time is not on your Side

There are numerous other factors that will go into the research, design, build and integration of an enterprise data management strategy. However, without the right leader and direction at the top, appropriate vetting and inclusion of applicable scope, and leveraging existing or new technology partners, what many are left with are half answers to very full and complex questions. With the need for transparency increasing and the timeframes to provide that information decreasing, financial services firms don’t have the luxury of time. Regulators, clients and investors need the data now!

To learn more about 13f-2 watch our webinar replay Part 1: Unpacking the SEC's New Disclosure Rules for Shareholders
Join us for Part 2: Operationalizing the SEC's New Disclosure Rules, for Shareholders on December 12.