Coping with compliance: The need for data management in financial services

If you’re a Chief Data Officer (CDO), lingering bedtime thoughts about what may be lurking in your database could keep you up at night. And it’s easy to see why. Today’s financial services companies are so tightly regulated that any slip-up can be costly—and not just financially. Tales of noncompliance penalties levied against financial institutions spread like wildfire in the media, damaging your company’s reputation and spooking investors or potential customers.

Staying on top of financial regulations is an ongoing project and one that is constantly evolving. It makes sense, then, why so many large institutions still struggle with it. Many simply lack the automated data management practices that would help them to be successful. 

The need for good data management

Coming out of the 2008 financial crisis, many of the regulations that were applied to the financial industry have a similar objective: to increase the transparency of organizations’ data in order to monitor and mitigate risky decision-making. To increase oversight and transparency, today’s financial institutions are responsible for collecting, validating, and reporting on an increasingly complex amount of information. This requires top-notch data management practices to ensure that information is readily available and fit for purpose.

But when it comes to achieving compliance with burgeoning regulations, financial institutions are at varying levels of readiness. The global systemically important banks (GSIBs), for instance, have been dealing with strict regulatory requirements for years now, and they have entire departments working toward compliance. Smaller banks and credit unions, on the other hand, have been largely unaffected by these recent changes and have less sophisticated compliance departments. Eventually, though, these regulatory requirements will make their way down to the smaller institutions, and they will need to fall in line.

That’s why prudent financial services organizations should learn from the data management practices pioneered by the GSIBs, and begin to implement their own data management programs. To learn more about these specific regulations' impacts on data management, check out our white paper, Playing data defense: A look at financial regulations' impact on data management. 

Implementing a data management program

Data management is integral to your financial institution’s ability to remain in compliance. To help get you started, we’ve put together some tips for implementing a data management program at your organization.

• Get executive support: If you want your data management program to succeed, it’s vital that you get executive buy-in from the beginning. C-level executives want to ensure that the company remains in compliance so that shareholder confidence is not negatively affected. By demonstrating how your data management program is a vital aspect of the compliance process, you can more easily gain executive support to invest in new systems or hire additional headcount.
• Empower your data stewards: Data stewards enforce the organization’s data governance policy. All too often, however, data stewards are forced to create one-off spreadsheets or codes to govern their data. By investing in the necessary infrastructure and data management software, you can enable your data stewards to work much more efficiently, standardizing processes and making reporting for regulators more streamlined.
• Focus on data quality: In an industry where an estimated 26 percent of customer data goes bad every year, remaining in compliance is an ongoing challenge for financial institutions. This can increase the risk that confidential customer information (like bank account numbers or account balances) could be exposed. By using email, address, and telephone validation as part of your data management program, you can prevent incorrect contact information from ever entering a database.
• Break down silos: Regulatory requirements such as Foreign Account Tax Compliance Act (FATCA) and Know Your Customer (KYC) mandate financial institutions aggregate customer information from a variety of sources. According to our research, 37 percent of financial institutions maintain high-quality contact records to create a single customer view. However, many banks still struggle to aggregate customer data across disparate sources. If you want to leverage your data to remain in compliance, breaking down data silos is a necessary step.
• Measure ROI and performance: In order to have a successful data management program, you have to be able to quantify your results. This can include the sum of potential regulatory fines that you avoided and the time savings you’ve achieved by implementing the right software for your data stewards. Attaching an ROI to your program will ensure continued support from executives.

Without a proper data management strategy in place, financial institutions will struggle to deliver the true transparency that regulators require. For financial institutions, bad data can result in hefty fines from regulators and possible litigation, depending on the severity of the infraction. However, with a proactive data management strategy in place, financial institutions can be better positioned to comply with regulations when they inevitably trickle down.

Learn how you can embrace a proactive data management program to meet financial regulations by downloading our latest white paper.

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