By Vangelis Tsianaxis, Head of Consulting, IPC
I recently was reading a very interesting paper by McKinsey on data and application architecture for Capital markets, and it occurred to me that the financial industry has made very slow progress in making data a key building block.
After 17 years of data, risk and regulatory compliance work I have been involved in, it seems to me the industry is not making sufficient progress in meeting the most fundamental challenge (or opportunity) in turning data into an asset by – understanding data and its value within the context of each company’s business and market processes. The prerequisite and assumption there is having a sound understanding and control of the processes one is trying to impact. And that may be the fundamental problem.
Whether we are using data to generate new or incremental revenue, or to cut cost within existing operations, or to apply regulatory controls and risk management, it is essential to:
- Understand key business processes and how they impact delivery of services to customers,
- Master how they are enabled by “fit for purpose” data assets,
- Ensure the data remains fit for purpose, as your environment changes, and
- What is the flexible technology architecture to provide on-going support.
Instead, what seems to happen is that as processes evolve to meet business and market changes, the effort to keep the data assets fit for purpose is not matching the pace. As a result, traditional players in the financial markets are stuck in a perpetual cycle of inefficiency and high cost of enabling their own business or managing regulatory change. And even innovative players, coming into the market without the limitations of the big banks, seem to fall in the same trap in the long run and ultimately become victims of their own success.
For example, in order to reduce missed trades, the work of handling exceptions, breaks in data processing, and manual interventions to create efficiencies for your finance function, it is essential to understand what the finance function needs to do within the trade lifecycle. And that needs to be with the aim of delivering a better service to the end customer in mind, not just improving the next step in the existing internal process or meeting the expectations of whoever shouts the loudest in the organisation about an inefficiency that disturbs their world.
Instead most of the current discussion seems to focus on AI, robots, blockchain, digital transformation, data lakes, etc. and how these technological solutions may offer a quick fix to data management ineffectiveness, while ultimately, we often still struggle with the basics. In my opinion, a lot comes down to the communication channels between key stakeholders in the financial services organisation (tech, business, risk, compliance) being ineffective, often resulting in technology delivering technology for technology’s sake and data seen as a side show. It appears the above stakeholder groups often fail to understand that fit for purpose data is key to addressing challenges, whether related to business processes or regulatory compliance. Even Chief Data Officer organisations often fall in the trap of the status quo as they can’t get business backing for major changes as stakeholders underestimate the value of data. At the same time, they fail to make the most from their partners (vendors) in the delivery of solutions by integrating them closely to their initiatives and taking advantage of their industry experience.
All of that makes me think it is time to be more radical in changing the industry rather than hoping that we will be saved by the robots. While waiting for them to come to the rescue most people still have a business to run.
Key to that would be to become even more innovative in the way the industry collaborates and for the financial services organisations to work in closer partnership with what they today see as ‘vendors’. By collaborating with those partners, that provide critical capabilities to doing business and making them integral to business, risk and compliance management, each financial services organisation can stop trying to address the same data and technology challenges by themselves.
This is a priority for us here in IPC as we recognise that offering telephony systems to our clients without understanding the information and data flows that enable their business processes is not sufficient for their long term success and thus ours. Our aim is to become integral in addressing our clients’ challenges in communications and collaboration across all market participants through cutting-edge capabilities and fit for purpose data assets that support them. We are up for the robots as well but they will have their day after the industry gets the fundamentals right.
© 2018 IPC Systems, Inc. All Rights Reserved. The contents of this publication are intended for general information purposes only and should not be construed as legal or regulatory advice.