Bringing Legacy Investment Banks into the Digital World

Framing the Challenge

When you type something into Google you (almost always!) instantly find the answer to what you are looking for without any specialized coding skills, special hardware, trained data analysts or prior knowledge of how the data is organized. Imagine if we could replicate this in our internal corporate domains!

With honorable exceptions, investment banks have not – until recently –  felt the pressure to make dramatic changes to how they generate, use and leverage their number-one resource, data. But with hungry Fintech start-ups swooping in, it is vital for investment banks to significantly improve how they leverage their data resources to survive and stay relevant.

So, how do we get there?

First Step in Data Management – A Strong Defense Leg in the Data Management Strategy

In the defense leg of Data Strategy, banks are greatly assisted by data governance requirements issued by global banking regulators, which require banks to do what they should have already been doing with data. This new set of regulatory requirements put into place after the financial crisis in 2008 – encapsulated in BCBS 239 –  requires banks to have a comprehensive governance mechanism to assess the completeness, accuracy, timeliness and adaptability of their data, which is critical to risk and finance processes.  To quote a popular adage “never let a good crisis go waste … it's an opportunity to do things you think you could not do before!”

Here are the Important Defense Stance Activities:

• Build a Global Data Culture: Harmonizing Data Governance across the organization is the first step in changing the data culture. While there are several models for comprehensive data governance in vogue, the federated model of data ownership seems to be well in the lead. In this model, a relatively small central data governance team is supported by an organization-wide network of data domain owners and data stewards.  This model emphasizes the shared nature of data governance, where the responsibility for good data rests with every single individual within the organization.

• Trusted Data: The Data Management governance framework needs to be able to provide the data consumers (both internal and external) with assurance that the data they are receiving is of sufficient quality and has been through a robust process of due diligence.

• Regulatory Compliance: The Banking Regulators are one of the most important external consumers of an organization’s data. The defense phase of the Data Strategy should ensure that information needed for the Regulators is clearly of a high quality. Ensuring that you have happy regulators allows you to move to the next phase of the Data Management process.  

Next Step - The Offense Leg of the Data Management Strategy

The defense stage deliverables set the stage for value creation in terms of managing strategic risk, predicting client behavior, identifying new revenue opportunities, modeling and hedging of risks, and driving cost efficiencies.  This in turn provides quicker time-to-market with new products, cost reduction and revenue maximization.  

Below are the Important Offense Stance Activities:

• Client Experience: Using quality assured data (provided by the defense leg of the strategy) should be one of the first deliverables of the offense leg of the strategy. There are many ways in which you can use quality data to improve your client experience.  These can range from providing customers a full range of activities with the organization to making suggestions for the future.  You can also use data to assist your clients by warning them quickly and efficiently when something is wrong or about to go wrong (e.g., fraud detection and prevention).

• Efficiency: Having a sound data framework will enable you to drive efficiency and ultimately long-term cost reduction. By having golden sources and authorized access points identified for key corporate data, individuals can easily access the data that they need by directly going to the source and in turn, significantly reducing IT costs.

• Insight and Monetization: Once you have sound data, you can use it to identify new items that you can market to clients, essentially changing the game and your product line. You can also use this data to more efficiently hedge and manage risks.

Conclusion

Data Management is a journey, it takes hard work and dedication to take your organization from just housing data to being able to use the data for its information, analytics, insight and action. To be successful, one needs a potent combination of defensive and offensive plays. If we can give our users and customers fit-for-purpose data quickly and transparently without having to deal with systems and definitional complexities, we are set and there is no turning back!  We are on this journey together and have much to learn from one another. Successfully deploying a competitive Data Strategy is a key survival and success differentiator for legacy organizations.