Managed data services provider RIMES recently held industry round tables in Toronto and Montreal, and participants weighed in on the progression of their data governance framework, as well as the key factors that are driving their efforts to set up proper policies and procedures.
Representatives of investment managers and pension funds attended the Toronto event, covering functions ranging from data management to performance management and analytics.
Over in Montreal, representatives of investment managers, pension funds and public pension plan managers were valuable participants.
The discussions held at both of these events granted insight into the challenges that industry participants are currently facing. These companies are navigating a tough environment that involves rising data costs, stringent regulations and increasingly complex vendor licensing agreements.
Over the years, RIMES has collaborated with several investment management consultants, such as Cutter Associates and Deloitte, to develop reports which explore why benchmark data is crucial to investment managers and their clients’ increasing needs for customized data.
Buy-side firms received further guidance on overcoming their challenges when RIMES and Investit released The Data Governance Handbook in 2013. This document provided practical steps that institutions can take to establish the policies and procedures for their important information.
Assessing progress: methods for buy-side firms
Institutions that want to evaluate their data governance framework and single out next steps can turn to The Data Governance Handbook. This document outlines three states of development and four stages of maturity. The three states include:
- State of the industry: Investment managers are facing the dual pressures of rising expenses for their data and a need to accomplish more with this information. Forums attendees all agreed that buy-side firms are looking to “do more with less.”
- State of the data: Firms are making a push to leverage a wider range of investment strategies and get exposure to more assets.
- State of the players: Questions about ownership of data characterize this phase. This situation involves uncertainty regarding who is responsible for key information, and also who has the license to use it. Institutions might have a hard time determining whether they should centralize their data or hold it in numerous places. Either option has its advantages and disadvantages.
Four stages of maturity
During the forums, participants were walked through The Data Governance Handbook’s detail on four distinct stages of maturity that data governance frameworks can have. Firms that are looking to evaluate their information policies and procedures may find these phases helpful.
- Non-existent: Firms that have not yet put significant due diligence into setting up the proper data governance framework are here.
- Emergent: This is for institutions that are just getting started on developing their information policies and procedures.
- Work in progress: Companies that have invested significant time and energy into developing the right framework are here. A wide range of firms are at this point in their development.
- Mature: Reaching this stage requires significant time, energy and preparation. To get to this point, buy-side firms must get stakeholders at all levels of their business on-board with the key importance of data governance. In addition, institutions must make improving their framework a constant focus.
Round-table respondents weigh in
When asked to weigh in on their maturity levels, participants gave varying replies. However, not a single attendee at either round table said their firm had reached stage four.
One attendee at the Toronto conference said his firm was approaching the “mature” stage. The individual who specified this is responsible for looking after benchmark data for an international investment manager. He emphasized the size of his firm, noting that it has hundreds of billions in assets under management.
The representative elaborated on how data ownership is organized at his company, stating that the international investment manager has a small global data team in London. The company also has teams involved with key information in other offices.
The global data team has ownership for benchmark data across the entire business. The people working for the investment manager haven’t always liked this setup, but they now see the benefit of this infrastructure. Corporate staff can find the answers they need in one central place.
Another individual, who manages data governance for a global investment manager, stated that his company is at the “work in progress” stage. The buy-side firm has a wealth of managed data, and has developed strict controls that govern IDs, matching and the rolling out of different indices.
Why prioritize data governance?
Participants at the two forums weighed in on the factors that motivate their firms to focus on data governance, providing some similar responses. Challenges involving data ownership and vendor licensing agreements came up as common themes.
One attendee, responsible for benchmark data at an investment manager, elaborated on the concerns that are driving his company’s efforts to obtain more mature data governance. He stated the buy-side firm encounters many data ownership challenges.
The institution is concerned about who is using its crucial information, as well as where it’s going. He emphasized that data usage can have many implications, and that this impact must be assessed. For example, a company should evaluate the impact of simply telling a client that a specific benchmark can be obtained. The firm should also consider how they are being charged for using the benchmark. Some data vendors have very complex licensing agreements, which can be rather location-specific.
These considerations affect every aspect of using benchmark indices – including the point where they are onboarded, the systems that hold the crucial information and how this data is applied to a business.
“It’s all about understanding the different touch points of the business, and who are the end users of that data, and then putting a structure around that system so we can hopefully control the information – so if we are audited, we can say exactly where the data is going and understand how it is being used by the business,” the attendee said.
Another attendee, who participated in the Montreal round table, noted the key role that implementation plays in establishing data governance. The individual stated that implementation can take up to three weeks, but that their company is working with RIMES to expedite the process. Being in touch with the right attendee at the data level takes a lot of effort, but working with RIMES makes this process easier.
One participant, responsible for acquiring market data at a major investment bank, noted the important role that licensing plays in driving data governance.
The institution has both buy-side and sell-side custody, and ends up entering into agreements with the same vendor multiple times. As a result, the company has to navigate a complicated framework of rules.
Once the crucial information is available, the most important matter is educating users on what they can and cannot do. In a large firm, achieving this can be challenging. Fortunately, the round table participant’s company’s market data department is both centralized and rather mature. In addition, corporate staff know they must reach out to this team before taking any action.
“We’re just kind of peeling the onion right now, and seeing where that data is used, but it’s pervasive,” the attendee said.
Buy-side firms can take different approaches to data governance, and participants at these two round tables were able to shed some light on how their institution addresses its need for information policies and procedures.
At the Toronto event, a representative of a global investment manager portrayed his company’s data governance efforts as a “hybrid approach,” which has the backing of senior management. Since data governance is such a large problem, having this top-down mandate is not enough. Bottom-up efforts are also needed.
At the Montreal event, participants reported a different set of challenges. For example, many of the individuals attending that event noted a lack of executive buy-in. They emphasized that if senior management doesn’t prioritize this matter, a company’s information could be all over the place.
One attendee noted that they were appointed data czar by a manager. The individual’s company was paying for an index, but didn’t know who was using it. The representative emphasized the need for better organization.
How firms can evolve
Buy-side firms that want to move forward in terms of their data governance have a wide range of tools at their disposal. Institutions that want access to practical steps they can take might consult The Data Governance Handbook.
Companies that want information more specific to them might consider working with a managed services provider like RIMES to undergo an in-depth assessment of their current data governance framework. By taking this step, institutions can pinpoint specific areas that will do them the most good in terms of generating improvement.