Creating a Data Line of Sight in Financial Services
Financial services organizations have always been rich in data and heavily regulated. But despite large investments in software, people, and processes to manage risk and regulatory compliance, bad things still happen.
Consider this recent example reported in The Wall Street Journal, affecting some of the most prominent firms in the industry:
“Five global banks agreed to pay more than $5 billion in combined penalties and plead guilty to criminal charges…. The settlements largely close the book on the latest industrywide investigation, one of a steady stream of probes into mortgage misdeeds, manipulative trading behavior and tax evasion. The biggest global banks have paid more than $60 billion in penalties over the past two years to resolve allegations of wrongdoing.”
In the aftermath of such horror stories, risk and compliance managers as well as chief technology officers at these firms invariably ask the same question:
“Why didn’t we see that coming?”
How do the most sophisticated financial institutions get so blindsided? The problem comes down to poor visibility into their own data. Risk and surveillance operations often lack a clear, unobstructed “line of sight” into disparate data sources, or silos. When one cannot see clearly how activities in one data silo are related to activities in another, the chance of a negative event – such as rogue risk taking, rate manipulation, or financial fraud – is high.
Commenting on a price-fixing scheme in an online chat room, one trader at a recently penalized bank was quoted as saying, “If you ain’t cheating, you ain’t trying.”
Bringing All the Data Together
Chief technology officers and line-of-business leaders in financial services organizations want to be able to say, “We’re glad we saw that coming!” That requires getting their houses in order from a data management perspective.
The cost of doing so is trivial, when one considers the billions of dollars paid in penalties for criminal wrongdoing. How many dollars would these organizations have saved had they invested in a unified data platform to create a clear line of sight for their risk and surveillance officers?
The costs extend to corporate reputations as well. How much bad press would financial institutions have avoided had they invested in a data platform to monitor and analyze all kinds of data, including social media posts and conversations in online chat rooms where illegal activity may be coordinated?
To gain the necessary line of sight into all data sources, financial organizations must run their risk, compliance, and fraud-detection applications on a single, unified, global data set. But this kind of integration is challenging when the data changes frequently, or when it is siloed, in disparate forms, or too complex.
The treadmill of keeping up with regulations, preventing financial crime, and responding to investigations is hindering growth and innovation in financial services. Having an advanced data platform that integrates multiple data sources and types, and provides a clear line of sight, can break this cycle. With such a platform in place, financial services organizations will be ready to respond quickly when regulations change or new ones are issued, without draining resources from work on the innovative applications these firms need to win and keep customers, and to stay ahead of competitors.
Will Walter is responsible for business development and strategy to align InterSystems’ technologies with innovative opportunities in the financial markets. Will has played key roles in transforming businesses at Goldman Sachs, Deutsche Bank, New York Stock Exchange, and Barclays. Will also built and led the professional services practice for TransactTools, a pioneering software company focused on interoperability and analytics within financial services. In his role at TransactTools, Will advised many investment banks, exchanges, asset managers, and other financial technology providers on best practices for connectivity and data strategy.