{"id":1509,"date":"2018-12-20T09:46:00","date_gmt":"2018-12-20T09:46:00","guid":{"rendered":"https:\/\/digiterrebestg.wpengine.com\/?p=1509"},"modified":"2024-05-30T12:48:16","modified_gmt":"2024-05-30T12:48:16","slug":"moving-from-regulation-based-risk-management-to-strategic-single-view-of-the-truth-data-architectures","status":"publish","type":"post","link":"https:\/\/www.digiterre.com\/us\/2018\/12\/20\/moving-from-regulation-based-risk-management-to-strategic-single-view-of-the-truth-data-architectures\/","title":{"rendered":"Moving from regulation-based risk management to strategic, single-view of the truth data architectures."},"content":{"rendered":"
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Moving from regulation-based risk management to strategic, single-view of the truth data architectures.<\/h1>\n\n

We no longer have a risk-based regulation. What we have is regulation based risk management and what we need to effectively address this see-change in the regulatory landscape, and to run our businesses even more effectively \u2013 are data architectures which can readily surface a \u201csingle view of the truth.\u201d<\/p>\n \n <\/div>\n<\/section>\n\n\n

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This was one of the key conclusions reached at the quarterly meeting of the European Risk Management Council on December 10, 2018, in London.<\/p>\n\n\n\n

It\u2019s been a busy year for Digiterre and CEO Ian Murrin was invited to present a case study on the deployment of \u201cSingle View of the truth\u201d real-time data architectures to solve regulatory-driven reporting and analytics challenges in large financial institutions at the European Risk Management Council\u2019s Fintech think-tank meeting. This invitation-only event encompassed discussions around Data & Regulation, Cyber-Security and Data Privacy together with the more usual fare of market and Liquidity Risk concerns. This meeting had 25 CROs, C-level executives, board directors and other senior executives from banks and other financial institutions. The event is held under Chatham House rules.<\/p>\n\n\n\n

Here are some of the key topics that were discussed by the Group at this meeting.<\/p>\n\n\n\n

How prepared are you for when the Regulator comes knocking?<\/strong><\/h4>\n\n\n\n

Imagine this scenario:<\/strong> You wake up to a letter stating a fire drill exercise will be conducted for the next 6 days to test your organizational readiness and reporting capabilities. The exercise is part of the Regulator\u2019s effort to assess your organization\u2019s compliance around the management of liquidity levels \u2013 however, it could have encompassed any number of different risk-based scenarios from Liquidity to operational to market risk factors.<\/p>\n\n\n\n

You are expected to submit information by 11 pm every day. A check-up call will be made every morning with the Regulator and you are expected to give a comprehensive explanation of every recent transaction, large movements from day to day including information on minor adjustments, and why data hasn\u2019t changed overnight.<\/p>\n\n\n\n

A Single Version of the Truth: do you have one?<\/strong><\/h4>\n\n\n\n

Perhaps most concerning of all, is the fact that the Regulator could ask you to populate several different template formats \u2013 using similar but not identical datasets \u2013 across the week, or order to see if you can yield the same quantitative outcomes when the data is sliced in several different ways. This is a true test of whether your organization\u2019s data architecture can produce a \u201csingle view of the truth\u201d at the touch of a button, rather than by throwing people at the problem to hand-craft each report.<\/p>\n\n\n\n

This is NOT a Drill.<\/strong><\/h4>\n\n\n\n

In the case of one member organization, this was anything but a \u201cdrill\u201d. It was the real deal with the Regulator breathing fire down the CRO\u2019s neck throughout the assessment period.<\/p>\n\n\n\n

An isolated incident you may wonder? Well, actually not. It\u2019s no news that regulators are becoming increasingly dissatisfied with the state of data management in the financial sector and the rate of improvement has been quite slow. This so-called \u201cisolated incident\u201d is becoming more like common practice for regulators and similar situations have arisen in other organizations, large and small.<\/p>\n\n\n\n

So as one member pointed out, \u201cwe no longer have a risk-based regulation. What we have is regulation based risk management and that\u2019s why you see more focus on regulation.\u201d<\/p>\n\n\n\n

Regulatory-driven risk management has become the main concern for financial service providers and Regulators are becoming increasingly demanding. Organizations are hampered by ever-increasing rules and overlapping regulations, complicated by conflicting requirements and the need to supply ever more granular data. In reaction to this, operational resilience has become a key area of focus and this seems to be the way banking and the board agree and identify data gaps. Senior level meetings are now more driven by the regulatory agenda as there\u2019s a need to be compliant \u2013 that has become evident to us all.<\/p>\n\n\n\n

Data is gold<\/strong>. A fundamental problem in the financial sector is that many organizations struggle to understand the real nature, location and even volumes of data that they have within the enterprise. The implementation of GDPR in many organizations has made that fact painfully clear.  However, the data you have \u2013 be that related to the trade lifecycle, to customers and clients or to counter-parties \u2013 is the lifeblood of any complex business and is likely to be one of the key sources of competitive advantage well into the future and the smartest of organizations realized this a long time ago.  So merely \u201cticking the regulatory boxes\u201d with ad-hoc reporting and a high degree of manual intervention may not generate the greatest value for your organization or indeed, may not satisfy the regulator if the aforementioned scenario should arise.  However, addressing the challenge of creating a \u201csingle view of the truth\u201d data architectures which do support the aggregation, cleansing, enrichment and analysis of data in real time and which will support the business and regulatory reporting and analytics needs of multiple business functions from Trading and Risk through to finance and operations, could be the smartest strategy of all.<\/p>\n\n\n\n

Regulatory-driven change is the new normal so it\u2019s time we built data architectures to support this zeitgeist efficiency and effectively while also helping to address future questions using today\u2019s data.<\/p>\n\n\n\n

Digiterre\u2019s Mission<\/strong><\/h4>\n\n\n\n

Digiterre has been solving tough data and software engineering challenges for large trading enterprises for nearly two decades. Most recently we worked closely with Man Investments to develop and implement ground-breaking trade data listening and reporting solution to address their MiFID II Trade, Transaction and Best Execution needs.  The Man Order Listening Engine (MOLE) provides a scalable real-time data platform from which to address the Group\u2019s current and future regulatory reporting and trade analytics needs, with a single view of the truth throughout the trading lifecycle.<\/p>\n\n\n\n

The data architecture further strengthens Man Group\u2019s competitive advantage by creating an extremely high-quality data stream, from which real-time analytics can be performed, to further enhance the trading and operational effectiveness of the firm. With this data architecture, data flows are now easily analyzed in real-time with a central view across multiple trading entities, to satisfy both current and potential future regulatory requirements. The design and architecture of MOLE have the built-in flexibility to handle trade data collection and analysis needs that are likely to be important in future. Data-related strategic opportunities have opened-up for the Group as a result, thereby supporting its trading activities across all its markets. This is a great example of using the demands of regulatory compliance as a catalyst to build an even better, stronger and more responsive business.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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About the Author<\/h3>\n
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Digiterre<\/h4>\n\n \n \n <\/div> \n <\/div>\n
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