It has always been the case that no sensible or clear investment decision can be made without supportive and accurate data – and as much as possible. But as all traders and investment managers know, or quickly come to discover, the quality of available data is at least as important as the quantity. Furthermore accessible, comprehensive and timely information is becoming increasingly vital as firms come to recognise that efficient data management is also a critical component of performance, risk management and, moreover, client satisfaction.
Overlaying all these requirements is the new and increasingly burdensome regulatory environment. Investment managers are now faced by what some would describe as a kaleidoscope of national and international rules which in some cases appear ambiguous and in others to be in conflict, one with the other.
Faced with this fast shifting landscape, efficient data automation is the only plausible response. Today’s managers must be in a position quickly to consolidate, select, store, manipulate and, where necessary, enrich appropriate data to respond to the range of demands that are now imposed upon them.
The increasing premium placed on resource management and on accurate and timely reporting, allied to the core business of taking the best trading decisions, has meant that data management has risen to the top of financial institutions agendas. Data is now considered to be a strategic priority and a business enabler.
Firms are looking for data solutions with the built-in capability to scale for future market demands, while enabling them to become efficient and compliant at minimal cost.
Unsurprisingly, the issue of cost is critical. The fact that many firms are – or were – individually pursuing the same labour-intensive objectives for data management, and doing so at high cost, has led the industry to think in terms of collaboration, efficiency and client handling through shared services. One indicator of this is the increasing trend towards firms wanting to leverage centralised services for both data collection and distribution.
Investment management firms are today recognising the vital need for a comprehensive data strategy and also have a much clearer understanding of the costs and risk associated with their current processes. They know that there is an opportunity to pool resources in, for example, the formation of collective data utilities which will significantly improve the management of future risks and the control of future costs.
Choices are being made based on the reputation, capabilities and security of third party providers. As firms develop and strengthen their data strategies, it is inevitable that some sort of vetting process will also emerge for which utilities to leverage.
Well managed data provides the foundation for firms to meet their regulatory and compliance requirements. Each new regulation brings its own management challenges (and costs) which is another reason firms are seeking to leverage centralised data services. There is a sort of Musketeers’ approach here: “All for one and one for all,” which translates as asking why should each firm pay separately for solutions that every firm requires?
Another trend is changes to the trading and settlement cycle. In most cases settlement times are getting shorter and trading volumes are increasing so there’s a need for platforms and systems that scale and evolve as market conditions shift.
For all the momentum towards change and the siren call of efficiency, many firms continue to operate with high cost and/or high risk customised systems and apparently have no formal strategy or plans to change. This inertia stems from either a misunderstanding of the effort involved in implementing a coherent and comprehensive strategy or, frankly, simply not knowing where to begin.
However, the pressure to evolve is mounting on a daily basis. Many firms are feeling the challenges posed by increasing demands from both regulator and the investor and, moreover, the need to differentiate based on quality and range of services. These factors are driving executives to include a formal data strategy within their overall business plans for sustainability and long-term growth.
And again, compliance is a major factor here. Regulatory compliance requires access to a variety of reliable datasets particularly given that failures in this area can lead to heavy fines.
As stated, data management automation is about risk management, performance enhancement and cost savings but it also eliminates manual work and thus human error. Executives can spend less time sifting through and searching for data and spend more time putting it to use in delivering enhanced client experience and underpinning, indeed revealing, better investment opportunities.
Properly managed accessible data is, and is increasingly seen as, an opportunity rather than a problem or issue that needs addressing. It’s about trading and about the three Cs of Compliance, Cost efficiency and, perhaps most importantly, Client satisfaction all of which ultimately increase the profitability and long-term health of the operation.
By Daniel Eriksson, Vice-President, Product & Solution Consulting, Advent Software