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Pivoting to Head Coach: The Evolving Critical Role of Chief Data Officers in Financial Services

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The role of the chief data officer (CDO) has undergone a transformation lately. While security and compliance remain key aspects of the role, it has become increasingly more strategic and innovative. This shift has led CDOs to take on an even more strategic role in key business decisions and within the financial services industry -- in particular, the position has quickly become a staple of forward-thinking organizations.

With this, CDOs’ key focus areas are changing. They’ve got to ensure they are not only securing data and their organization is meeting rigorous data regulations, but that they are also devising new data management strategies to leverage data from across the entire organization, as well from external sources to generate business value. However, this isn’t without its challenges, particularly in a rapidly shifting regulatory landscape.

To employ a sports analogy, Chief Data Officers have led the defense for the teams they serve: constantly devising strategies that fend off new threats, respond to new regulations, and retain the competitive advantage. But as data plays a bigger role every day in the overall strategy for nearly every business, they are now pivoting to a role akin to the head coach and putting both offensive and defensive strategies into play. They must figure out how to deliver more value to customers, reduce risk, and respond more quickly to the needs of the business. A combined defensive and offensive strategy must leverage data to its full effect.

Understanding the financial services industry landscape

To understand how financial services firms are coping with data- and analytics-related challenges and an ever-changing regulatory landscape, InterSystems partnered with World Business Research (WBR) Insights and Financial Data Innovation FIMA to survey 100 senior executives at investment banks, asset managers, hedge funds, and insurance companies globally. The results, and our analysis of what this means for the future of the financial services industry, are published in the FIMA report, The Evolving Role of the CDO at Financial Organizations.

Overall, the findings highlight that organizations in the financial services industry have made gains regarding financial data compliance functions, with the majority of firms now just allocating 40% of their data practice’s operating budget to these initiatives. Encouragingly, this means that up to 60% of their budget can be used to pursue more strategic, “change the bank” initiatives, such as implementing new, innovative customer-facing services to deliver more value to customers and gain that important competitive edge.

Automating compliance in financial services

Financial organizations could also use this budget to advance their compliance automation efforts as at least half of compliance functions are still performed manually in over 54% of organizations, with only five out of 100 firms reporting that 70% of their compliance functions are completely automated.

Compliance automation is undoubtedly an ongoing process, which requires continued work and investment, both to automate current compliance initiatives and to stay up to date as requirements change. Fortunately, it appears the financial services industry is open to embracing this type of technology as the research shows that CDOs believe that Artificial Intelligence (AI)-assisted analytical cloud services and predictive analytics will be most important for enabling them to adopt an offensive approach to data management to support key business objectives.

Implementing enterprise data fabrics

The survey also found that enterprise data fabrics are emerging as a popular choice for enabling data management strategies. This newer approach is an architectural pattern that enables firms to access data from multiple sources on-demand and harmonize and use it for the needs of the business, enabling them to derive greater value from their data.

With the vast majority (87%) of financial services data executives saying they are prepared to support offensive data management strategies in 2021 to further crucial business objectives, it seems it’s only a matter of time before data fabric solutions and approaches become more commonplace within the financial services industry. Many leading financial services organizations are already leveraging enterprise data fabrics to power a wide variety of mission-critical initiatives, from scenario planning, to modeling enterprise risk and liquidity, and wealth management.

Such data fabric solutions are enabling financial services firms to sift through enormous volumes of data and gain a single view of accurate, consistent, and trusted real-time data. This approach is enabling organizations to address many risk and regulatory related initiatives, including risk data aggregation (70%), CFO attestation (67%), and Comprehensive Capital Analysis and Review (CCAR) (62%).

As these issues are exacerbated by a growing range of data sources and the prevalence of data silos impeding their ability to process risk data, measure their performance against risk tolerance, and obtain a holistic enterprise view of risk, deploying AI-assisted data fabric solutions that provide full visibility across enterprise-wide legacy applications and data silos are helping financial services firms overcome these hurdles.

Looking to the future of the financial services industry

Ultimately, a lack of visibility and inability to easily work with distributed data assets is a common and complex problem for financial services firms and is significantly impacting their ability to successfully implement both offensive and defensive data management initiatives. Forward thinking financial services firms have begun implementing modern approaches to data management, including enterprise data fabrics, microservices, APIs, automated governance, machine learning, and cloud technologies that help bridge these silos and enable them to meet their myriad business requirements faster and with less effort.

As the ones positioned to become their company’s head coach, CDOs are adapting their skills, modernizing their enterprises, and employing offense – not just defense – to create a winning data strategy.

To find out more about the evolving role of the CDO within the financial services industry, download the full report here.

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