Resources for effective risk data aggregation

Buy-side firms looking to aggregate their risk data effectively have a wealth of guidance they can follow.

In some instances, regulatory organizations – such as the Federal Reserve or the Basel Committee on Banking Supervision – have provided this information. While the Fed released the Comprehensive Capital Analysis and Review, through which institutions can use aggregated data to perform stress tests, the BCBS supplied Principles for effective risk data aggregation and risk reporting.

Buy-side execs provide suggestions
Aside from these documents, buy-side staff offered suggestions for best practices at events like the Inside Reference Data briefing on Nov. 20. At this gathering, many participants recommended that industry participants looking to aggregate their risk data start by separating this information by owner.

“We all agree that we need to divide up the data and the domains, and we should be owners of each of the domains,” Ulku Rowe, who works for J.P. Morgan as managing director of credit risk technology, stated at the event. “But those domains are not that easy to define. What do we mean by client data? If it’s just the name and address, give it to the onboarding people. But you may have to figure out what Basel treatment the client has, or what they are allowed to trade.”

As data travels across buy-side firms, the first stakeholder must “own it all the way.”

Questions of ownership
Companies must figure out who owns the data before doing anything else, she added. Unfortunately, determining who is responsible for what may have grown more difficult. The number of parties with an interest in information has risen, said Daniel Schwartz, who works as a managing director for RBS in Stamford, Connecticut, the media outlet reported.

Varying data requirements
Buy-side staff working for the back, middle and front offices may all rely on this data, which can complicate where ownership lies. In addition, these segments may have different requirements in terms of quality and accuracy.

“We would produce risk runs for traders and they would think about their market and trading risk, and that was enough,” Schwartz stated at the Inside Reference Data briefing. “Now, we’re producing turnover measures for regulators, based on the best assumptions one could have, but these are still pretty complex questions being asked. I wonder if the proliferation of stakeholders in the result and the organic evolution of our infrastructure are really at odds.”

With the right approach, buy-side firms can ensure their risk data is grouped effectively.

‘Own it all the way’
As they manage these complex needs, buy-side firms need to be able to trace the lineage of their important information, he added. Rowe agreed, asserting that wherever the data goes, the first stakeholder must “own it all the way.”

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