2015: A Summer of Geopolitical and Macroeconomic Risk

By Rupert Brown | 6 October 2015

As this summer draws to a close it will be remembered far more for the geopolitical and macroeconomic events that occurred than its usual seasonal calendar of festivals, social and sporting events.

We have seen:

  • The Greek commercial banking system brought to its knees in the political standoff between the Greek political party Syriza and the EU;
  • A meltdown on the Shanghai stock exchange and resulting global contagion as fears that the Chinese economic miracle has stopped dead in its tracks; and
  • A mass migration of refugees heading to the EU on a scale not seen since WWII, driven by a combination of civil and internecine warfare as well as a variety of economic factors.

But if we look beyond the headlines and the visual media what will be the longer term impact of these manifestations?

A Strengthening of Risk Aversion and Identity Scrutiny

The suspension of the Schengen Open EU border agreement at multiple points along the refugee corridor to Germany and Sweden is the most tangible symptom of this, not forgetting the additional fencing put in at Calais Frethun to protect the Channel Tunnel.

The Scale of the Identity Problem

As the refugees are absorbed into the EU they are bringing cash and negotiable assets with them to pay their smugglers and purchase transport along their route.

Having been housed and given new national identity/welfare documentation they will need to open bank accounts and form new social and small business organisations. Doing proper KYC and AML checks at account opening will have to be mostly suspended as few will have any documentation beyond perhaps a passport or identity card.

Documenting and Understanding Social Relationships

Given that few of the migrants will be able to provide reliable personal identity documentation - let alone proof of title to assets - governments will need to build much richer models to capture the various relationships claimed by those seeking asylum and to try and weed out the potential IS and other radicals feared to be embedded in the flow.

Another Greek Crisis?

To date no one has tried to quantify the impact of the mass migration on Greece – presumably the EU will fund some of the transportation of the refugees through the country but there is only so much the Greeks can do without further assistance beyond the terms of their current bailout. The longer the migration continues, especially with the onset of winter, the more support will be needed.

A Chinese Perspective

Meanwhile at the other end of Asia we can reasonably assume that the Chinese economic stall will drive significant corporate consolidation as bankrupt assets are bought up and takeovers occur.

Being able to automate and capture all of the corporate actions that will occur as a result of this inevitable activity should be a priority for Beijing.

It is perhaps no surprise that the recent annual XBRL Conference in Copenhagen was attended by a large delegation from the Chinese Ministry of Finance seeking to understand how to apply XBRL to better document company structures and gain deeper insight into their hitherto burgeoning private sector.

Better Data, Standard Identities

The need to define, quantify and ideally mitigate the possible risks that stem from these macro events puts significant pressure on the way governments and private companies collect, store and analyse personal and financial data across the globe.

The financial crisis of 2008 was the tipping point for the introduction of a global system for Legal Entity Identifiers – it is not too much of a stretch to assume there will be a drive to standardise global personal identities in the wake of the migrant tide inbound to the EU.

Lessons We Need To Learn

We are in an era of “Data Model Uncertainty” – regulatory and geopolitical events are usually the catalysts for step changes as to how we define and analyse the world we live in. 

People are naturally fearful of change. However it can be mitigated by being confident of “Data Evolution Certainty” i.e., knowing what structural changes were made throughout the lifespan of a data model and that they were consistently applied. The Greek Legend of Theseus and the Minotaur with his use of the ball of string to backtrack through the Labyrinth is a particularly timely analogy.

In the middle of this sits “Data Interchange Complexity.” At the start of the current millennium XML emerged as a standard way of defining electronic negotiations and transactions of arbitrary size and interim states but despite the best efforts of Moore’s and Metcalfe’s laws, many optimisations have been defined to pack and ship some business domain messages more optimally.

So What Should Happen Next?

The academic community, led most notably by Sir Tim Berners-Lee, has been championing the capabilities of semantic technologies as the means to model this complex mesh of relationships, ownerships and provenance through the notion of ontologies.

We are starting to see some proof points in this space with the initial public release of the Financial Business Ontology (FIBO) and the work done by Charlie Hoffman, the inventor of XBRL, to define Semantic Models of the US GAAP and IFRS accountancy dialects.

The data challenges posed by this summer’s events should now be the catalyst for rethinking how we address the “Uncertainty” they have posed.

We know the inflection point will have occurred when we see construction and operation of large-scale public and private data repositories based on semantic models and with day-to-day analytics founded on the use of SPARQL rather than SQL queries. The challenge at the moment is to do this in a repeatable fashion with standard frameworks and also to avoid the potential bear traps that overly complex and constraining ontologies may create.

A Marklogic Perspective

Here at Marklogic we have had significant corporate and public sector experience of delivering “Data Evolution Certainty” against a backdrop of “Data Model Uncertainty.” Our platform has been critical to the delivery of regulatory solutions in Financial Services as well as the reform of the US Health Insurance.

Our ability to handle all XML dialects natively puts us at the heart of any complex business or government data supply chain.

Reflections on the Summer of 2015

This summer I’ve had the pleasure of watching Yorkshire retain the County Championship and witnessing England’s Ashes Victories at Cardiff and the rout at Trent Bridge live. These historic sporting achievements however pale into insignificance when we look at the social challenges posed by the unfolding events in Europe, the Middle East and Asia. We must not underestimate the longer term identity and interrelated data challenges these will also cause both to the private and public sector.
 

By Rupert Brown, CTO Financial Services at Enterprise NoSQL database platform company MarkLogic

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