The latest RIMES Chicago forum was held in September and addressed the key issues of data governance. It picked up on two principal themes emerging from a recent white paper by Deloitte – Benchmark/Index data management and related costs. Attendees focused in particular on the ways in which data was collected and used, the costs and the possible cost efficiencies, the monitoring of data and the controls within firms that ensured compliance and decommissioning.
“. . . data validation really takes at least one full body at a firm in order to manage those tasks. So we think this is something a lot of our clients are spending a lot of time on and we want to make sure that we bring attention to it.” Chicago Forum Attendee
Whatever the differences in approach within firms, whether as a consequence of size or structure, a clear consensus emerged around the need for a locus, resident within a department or an individual and underpinned by and led at a senior level that oversaw and understood the usage of data, its management and its value.
The increasingly important topic of data governance was addressed, as benchmark data has become more complex and data providers more circumspect when it comes to firms using data. Regulators are applying more rules and regulations around data management and there is now greater emphasis on the need for compliance – on monitoring and managing benchmark data.
A data governance strategy should be sought to understand the production and use – or otherwise – of data and to apply best practice in the interest of compliance and of cost efficiency. Working with several consulting groups, RIMES has surveyed asset management firms and found that while they were strong on data processing, they were less so on governance. The Deloitte study pointed out the cost implications where tier-one asset managers are less robust in controlling and monitoring the use of data. While firms are aware that they needed to be data compliant, they often lack a strategy or point of contact when it comes to managing it. Firms are also struggling to understand which benchmarks they are using and which funds they are tied to and this in turn raises the question of decommissioning.
“In some instances . . . there is no consensus on where the responsibility for the benchmark management lies, and no overarching authority to enforce some of these governance processes.” Chicago Forum Attendee
Firms across the globe are now creating roles to reflect the need for a dedicated team or individual to oversee data governance.
Attendees shared their experiences within their own firms and it was noted that there were surveys showing that dedicated index teams were better at data governance. One attendee mentioned that in his firm, while there is a split between research and operations teams, there is no dedicated management of index-level data whereas, elsewhere, a chief data officer had been appointed to bring together reference data, data pricing and benchmarks under one umbrella. Another attendee said they had a global head of benchmarks handling the data management process and working closely with procurement. While decommissioning remained an issue, this was an evolving strategy that would ensure better management of data. It was pointed out that while this was sensible, in larger firms there was the problem of numbers of people having an interest in cost structure but without the transparency as to how data was being used and why it was needed.
RIMES has recently launched the RIMES Data Governance Service, which comprises of three elements. Having checked and normalized a client’s data, the Repository stores the client files while the Directory is the catalogue, containing the metadata that can, for example, be interrogated when answering to a regulator. The Governor provides information reports and online tools, developed with the client to access the Directory and determine how the data is to be governed – how it is monitored and used and by whom it is owned. This service is built in-house and reposited in the cloud and the client’s FTP folder and allows the client to do its own reporting or have RIMES report on the client’s behalf.
To conclude, sustaining a good data governance approach requires firms to ensure that there are clear responsibilities with respect to the acquisition, monitoring and control of the data integral to the firm’s management and strategy. All attendees were all aware of the consequences of non-compliance and all had a responsibility to ensure that both soft and hard structures, attitudes as much as architectures were embedded.
“. . . you want to make sure that the firm as a whole is on-board with the concept of governance, looking for that CEO or that chief data officer, perhaps, who can have a more structured view, a bird’s eye view of what’s going on . . .” RIMES