Buy-side firms need high-quality, accurate information to remain compliant, Pam Martin of KPMG in the U.S., Giles William of KPMG in the U.K. and Simon Topping of KPMG in China wrote in a recent BusinessMirror piece.
Data integrity has always been a concern for these institutions, the experts noted. Buy-side firms have prioritized credit and market risk for some time, which have hinged on having accurate information. However, this need for high-quality data has intensified, as the financial services industry’s compliance environment has changed quite a bit in recent years.
The compliance landscape has grown increasingly challenging for companies in this sector as lawmakers across the world have enacted several comprehensive reforms. The legislative regimes that these government officials have passed include the Dodd-Frank Act in the U.S. and European Market Infrastructure Regulation across the Atlantic.
Because of these new rules, buy-side firms are compelled to develop strong risk management frameworks, the experts wrote. To function effectively, these systems for evaluating potential threats require institutions to not only single out, but also properly use, the data that is relevant.
In order to properly manage risk and meet the new requirements, many buy-side firms will need to improve their data governance, the authors stated. Doing so may obligate senior management to undergo a paradigm shift of sorts, as these key corporate officials have not prioritized data quality matters thus far.
Changing up this focus could deliver myriad benefits, as having information with greater integrity could easily provide numerous benefits, aside from bolstering the odds of successful compliance. For example, buy-side firms that want to stay ahead in a competitive environment need the most up-to-date information on the broader markets and the investment opportunities they are looking to pursue.
In addition, institutions can cut costs by eliminating redundant information. This could include transaction data or reference data, the authors noted.
The experts emphasized that regulators are stepping up their scrutiny of the systems that companies use to collect, store and analyze data. As these supervisors heighten this activity, they do not always like what they find. If the directors and senior management of companies want to stay ahead of these trends and be responsible, they should be sure to place the proper emphasis on ensuring high data quality.