Managed data services provider RIMES recently held its latest industry round table in Vienna, which gave participants the chance to weigh in on current trends in data management and data governance. Representatives of Austria’s buy-side institutions attended the event. Participants included people working in data management, performance management and risk management.
Their input shed some light on the challenges that firms are encountering. These companies are currently coping with strict regulations, increasing data costs and intricate vendor licensing agreements.
RIMES has provided firms with many resources they can leverage to come closer to attaining best practices. Over the last several years, the managed data services provider has worked with Deloitte and Cutter, among others, to develop various reports that companies can use to establish and maintain best practices around benchmark data management.
Deloitte white paper
One of these resources, a Deloitte white paper titled “Benchmark/index data management and related costs,” delved into the information difficulties that many buy-side firms face currently. This document produced a short list of major findings, which include:
- When processing data, corporate staff spend the majority of their time on validation and transformation
- Institutions are prioritizing rationalizing what data sources they use, as well as the number of benchmarks harnessed
- As the number of data sources grows, so does the amount of full-time employees working on benchmark/index data
- A fraction of survey participants noted that they are thinking about outsourcing data validation and transformation to a third-party integrator that specializes in benchmark/index data
- A strong minority – 42 percent – of respondents revealed they do not manage or control data use. Therefore, more robust controls might help reduce costs.
Respondents weigh in on benchmark/index data
The Vienna round table explored the findings of this Deloitte white paper, and gave participants a chance to chime in on their experiences with benchmark and index data management.
For example, an individual who works in risk management for a small investment manager offered some insight into the benchmark data management challenges that his institution has been facing. He affirmed a major finding of the white paper, that using a larger number of benchmarks frequently requires greater staff resources.
“I think that is the reason why our company, a small asset manager, is cutting down on the number of benchmarks,” he said. “We are focusing on two or three vendors or buyers of benchmarks so we can focus on the control of the data. We really want to have a short list of suppliers of benchmark data, which makes it easier for us to manage this information.”
When asked if his firm is encountering pressure to select specific benchmarks, the individual supplied additional information.
“We have discretion over the benchmarks we use,” the buy-side representative stated. “We don’t have clients telling us which benchmarks we use. The company needs to have a rationale, of course, for whatever it uses. One key variable is price. Another is whether the benchmark offers the detail or granularity of data that we need. Is it worth the cost? That is another concern.”
Despite the comments of this attendee, others noted that this is an unusual situation. For many buy-side firms, their clients are the driving force in the benchmarks that are used. In this sense they are at the mercy of their clients’ requests, yet nobody is challenging them as to whether they would be satisfied with using a benchmark that is similar, but less expensive.
How important is compliance to data management?
Participants also discussed the key role of compliance. The round-table moderator asked if buy-side firms are prioritizing the acquisition and processing of their crucial information, as opposed to focusing on monitoring, compliance and control.
One individual, who works for an Austrian buy-side firm, said that this is certainly not the case.
“I don’t think so,” he said. “In fact, I think that compliance is getting more and more important. “
Has compliance management become more mature?
Roundtable respondents got the chance to weigh in on the various compliance challenges that buy-side firms face. One representative spoke to the difficulties encountered by a German institution.
“I know from a German bank that the providers of the market data are usually exchanges, and they incur significant costs for their benchmark and license fees,” he said. “There are some major companies that pass through the data and are not responsible for compliance. For example, exchanges provide data, but do not create it themselves.”
“This is creating some challenges, because these bourses want money,” the representative added. “Banks are saying that the exchanges do not create the data, so why are they charging so much?”
Another representative noted the difficulties his firm is facing when interacting with its vendors.
“The compliance issue is quite challenging currently,” the individual said. “All the data vendors we have really want to know where we store the data, who is accessing it how we transform and if we are passing to another system – because that is where they earn money.”
Tools companies can use to move forward
While buy-side firms could encounter many different challenges in implementing an optimal data governance framework, these institutions have a wide range of tools than can harness to get there. Companies that want to proactively improve this set of information policies and procedures can harness tools like the Deloitte white paper to get tips on moving forward.
Another available option is working with a firm like RIMES to obtain an in-depth assessment of their data governance framework. By taking this step, firms can single out areas where they can enjoy the greatest improvement.