Buy-side firms have many reasons to focus on data governance initiatives, but in case they need some added motivation, here are some major ones.
1) Meeting reporting requirements
Institutions that want to remain in compliance need to successfully navigate a complex regulatory environment. Lawmakers have passed several landmark reforms in the years following the financial crisis, and these have added to laws that already existed.
These regulatory regimes have brought about many changes, and Dodd-Frank Act, a comprehensive reform that is more than 1,000 pages in length, has created reporting requirements that financial institutions must meet.
The situation is complicated by the fact that some aspects of these landmark reforms are uncertain. Some of them have not yet been finalized, and others are being challenged. For example, industry groups have targeted certain aspects of the Dodd-Frank Act, a comprehensive reform that is more than 1,000 pages in length.
2) Maximizing revenue
Another key concern that buy-side firms must consider is how they will leverage their information to maximize revenue, a data governance expert stated in a recent Smart Data Collective piece. Companies must always strive to improve their top line, but many might not consider the impact of data integrity.
Ineffective data management can not only drive up costs, but prevent buy-side firms from providing their clients with the most accurate information on their results and other key matters. It is also worth noting that in the current environment, many institutions are striving to make use of benchmark data that is increasingly complex.
For example, their clients may demand the use of benchmarks that are expensive, or ones that are completely customized. Amid this situation, not having high data integrity can cause errors when calculating returns. Providing improper information to clients could easily undermine the credibility of a buy-side firm, and potentially cost the organization some of its customers.
3) Maintaining efficient reporting
Another reason why buy-side firms should focus on data governance is maintaining efficiency in their reporting, the author wrote. If these institutions print out various reports, low data integrity could easily cause them to suffer inconsistency. Once a discrepancy is identified, company staff might start doubting the integrity of all reports generated.
If these employees suddenly have to check and then double check these documents, it can drive up labor costs and tie up the resources of key employees, the author notes. If buy-side firms want to proactively manage this potential risk, they can pinpoint the problem and then establish a strong data management strategy.
Buy-side firms might consider reviewing these major motivators when considering how they will set up their data governance initiatives. Doing so could prevent these institutions from taking such a task lightly.