Max Bowie: Strategic Data Assets Need Solid Governance Foundations

For years, market and reference data professionals have seen their roles as strategic—not just cost management and procurement, but rather as guardians of the crown jewels of the capital markets, or vascular surgeons tasked with keeping the lifeblood of the financial markets flowing. And yet, many of those to whom they report, or whom they must work alongside to achieve this common goal, don’t share the same belief in the strategic value of data, and instead see it only as the third-highest cost faced by financial firms, behind only staff wages and bricks-and-mortar building costs.

However, as evidenced by speakers at the recent Buy-Side Technology North American Summit, this latter point of view is changing, and data’s value is becoming recognized at the highest levels of organizations.

“For us, data is strategic. It doesn’t just sit there and accumulate; it’s a living organism that will grow and become more important. Because the more data you have, the more challenges you have—maybe even for smaller firms like us. And those responsibilities will always be there,” said Klay Stack, CTO at Marathon Asset Management.

Throwing it in a Cupboard
Of course, this isn’t to say that simply recognizing data as an asset means you’re in a position to get best value from it. In fact, one speaker privately bemoaned that when asked about data management, the IT execs on panels went into great detail about the level of storage infrastructure they’ve put in place, rather than what they’ve done to improve the accuracy, quality and correlation of the data. “That’s not managing data; that’s just throwing it in a cupboard,” the speaker said.

This was also reflected by executives from smaller firms believing that their businesses don’t need a dedicated chief data officer, saying instead that their data requirements could be effectively managed by their technology staff, whereas the larger and more mature firms represented took the opposite view: that a CDO will be critical to organizing myriad disparate datasets across multiple business areas.

An Eagle Investment Systems survey found that 80 percent of respondents considered data to be an important asset, yet 60 percent had no data governance structure in place.

In fact, lack of a specific, strategic role covering data management appears not uncommon. On a separate panel, Paul McInnis, head of enterprise data management at Eagle Investment Systems, cited a survey conducted by the vendor in partnership with WatersTechnology, which found that 80 percent of respondents considered data to be an important asset, yet 60 percent had no data governance structure in place.

What drove data governance efforts at JPMorgan Asset Management, for example, was the realization over time that “we didn’t have a single version of the truth—for example, we had different rates of return for the same security, which meant there were potentially many different answers to the same question, and a lot of duplication,” said Scott Burleigh, executive director at JPMorgan Asset Management. “Client guideline management—investment mandates about what to include in portfolios, risk management requirements, limits, counterparty instructions—impacts our data strategy and drives our data needs more than anything else. And clients are watching us like hawks—even more so since the crisis. For example, we used one data source to value an asset, and our client used a different source and thought we were out of compliance.”

Accuracy
One reason a good data governance structure is so important is that as firms seek more data—and increasingly, unconventional and unstructured data sources—to perform big data analysis, the value you can derive from that data depends to a large degree on how usable you make it, and how accessible a structure you place around it.

If you want to ensure the accuracy of your trading, accounting and risk management, you must first ensure the accuracy of your data. And to do that, you need to ensure the integrity of your data management and governance processes. Think of it as the foundation for a tall and complex building: Unless you correctly lay a stable foundation, everything you build on top of it is at risk.