Data & Analytics

08:51 PM
Bill Bradway
Bill Bradway

Data Management: A New World Order or Not?

Data management leaders will produce a comprehensive data management framework that provides a stronger for compliance with future regulatory reporting requirements.

Since the passage of the Dodd-Frank bill a few months ago, banking industry players have not lacked for issues to debate or bemoan. Among these many topics is the subject of enterprise data management and still-to-be defined reporting requirements from the new Office of Financial Reform (OFR). This issue is a perpetual and pervasive fact of life for bankers and their technology vendors. To underscore this fact, Bank Systems & Technology devoted its October 2010 issue (The Data Management Imperative) to covering data management from a range of perspectives.

Readers may be reacting to this latest legislative and regulatory development as if it is a new form of Chinese water torture where the victim has to both endure/survive the "torture" and pay for the experience to boot. No doubt, feelings of apprehension, frustration and resignation at a minimum can be found in the offices of every bank, thrift, and credit union. To minimize these feelings and prepare for future regulatory demands, executives can be proactive now and may even realize some incremental benefits.

One observation that may help bankers is an accounting-like approach to the issue of data management. Accountants demand that clients keep track of their fixed assets, such as land, buildings, furniture, fixtures and equipment, and liquid assets like cash, and report assets on the balance sheet. Why not use the same principle for data? For starters, consider each piece of data as an asset, categorized by each type of data field.

How should data be treated by institutions? For starters, CIOs and line-of-business executives should agree on an institution-wide framework and methodology for consolidating and documenting each data field that is used within an institution. Start with the portfolio of systems of record and then add to the framework the data elements from all reporting and data warehouses/marts that rely on a system of record as the supplier of data (including data from third-party vendors used in transactions, business processes or decisions). At this point, an institution should be well on its way to creating an auditable enterprise data library. Several vendors and consultants market tools or capabilities that are often referred to as "master data management" solutions. Many institutions, particularly small and medium-sized ones, use one key bank technology vendor and may be able to use that vendor's solution(s) to create an enterprise data management framework.

Why should an institution undertake this effort? One of the wrinkles in Dodd-Frank gives the OFR the power to define reporting requirements on-the-fly, sort of like a restaurant customer who makes up an off-the-menu order for the chef/cook and adds or subtracts ingredients or seasonings. In this analogy, the cook would need to have a kitchen stocked with and know where all of the needed ingredients are located to make the meal.

I always try to view new legislative and regulatory developments with a strong dose of common sense. In May, my column (Navigating Legislative and Regulatory Sea Changes) offered a perspective for the consequences of the legislative debate that preceded Dodd-Frank's final details. In conclusion, I stated that, "At the end of this sea change, market leaders will be the most fit and ready for the rest of the decade." In the case of data management, the leaders will be those institutions and key bank technology vendors that have anticipated and produced a comprehensive data management framework that will facilitate a stronger foundation for more effectively running their business (and all that it entails) and complying with future regulatory reporting requirements. Market laggards may resemble one-armed paper hangers or worse.

Bill Bradway, founder and managing director of Bradway Research LLC, analyzes the business strategies and IT investments of US banks and credit unions.

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