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Risk Management and Compliance Drive Improvements in Client and Counterparty Data Management, finds A-Team Group Survey

Integrated approach to counterparty and customer data is seen as crucial to accurately measure exposure, risk and profitability

Improvements in client and counterparty data management have three new principal drivers, according to an international survey by A-Team Group. Risk management, compliance and business development are the main reasons that financial institutions are now pushing to improve the aggregation of their customer and counterparty data, showing a more proactive approach to risk management and compliance.

The research, commissioned by GoldenSource Corporation, the Enterprise Data Management solutions provider, focused on the growing importance of linking counterparty data into the securities master and found that financial institutions are moving away from traditional functions, where client or counterparty information simply directs credit worthiness and after-the-fact performance, with almost nine out of 10 respondents seeing compliance as the most important reason for aggregating customer data, followed closely by risk (73%).

The research shows that an integrated approach to counterparty and customer data is seen as crucial to accurately measure exposure, risk and profitability as it allows a view of relationship hierarchies for roll-up. It also found that managing operational data such as Standard Settlement Instructions is one of the largest operational headaches as it still has a large manual component (36%) even though third-party data providers are utilized (24%) and internal systems are in place (40%).

Respondents indicated that while the current climate supports a data management solution build not buy mentality, mainly due to the understood complexity of integrating client/counterparty and securities masters with applications and business processes, there is recognition of the need for a smart platform and third-party data management solutions in order to improve flexibility, consistency and scalability.

“Complexity in new financial products has blurred the lines between instrument and entity data masters. This is because counterparty credit and risk data is now itself an attribute of complex derivative products,” says Gert Raeves, VP Business Solutions, GoldenSource. “As risk and compliance factors become more prevalent, the need to link issues to issuers has become more critical so that risk analysis and identification verification can be performed across all legal entities that relate in any way to an issue or its holders. This ties in with our customers’ experience that a holistic approach to operational, compliance and risk objectives provides better composite ROI - extending the value of a single golden copy of data across all consumers of shared product, customer, and counterparty data.”

The report, New Wave for Counterparty and Client Data, is the second of three targeted EDM surveys of senior reference data managers. The participants were senior-level individuals responsible for counterparty and or customer data quality and availability throughout the enterprise, and they had a close proximity to operations. They were involved in developing – as well as implementing and operating – the strategy for data management in these areas. Specifically, study participants held a range of job roles and responsibilities encompassing compliance, risk, securities master, client, counterparty, and/or SSI data management for organizations that could cover a hundred or more jurisdictions of operation.