Taking the right steps towards strong data governance
Strong data governance inspires strong data confidence, explains Brickendon Partner, Nathan Snyder, as implementation deadlines for MiFID II and GDPR edge closer…
With the proliferation of data in recent years, it is no surprise that institutions are struggling to deal with what is currently one of the hottest commodities around. Whether you’re a bank, a trading entity, or even a government body, on a day-to-day basis you will be faced with large quantities of data, sometimes sensitive, which needs to be collated, analysed and put to use. The key therefore is governance.
Good data governance is not only about meeting reporting requirements, it is also a way of showing that you are caring for information in a proper manner so the people who need it can access it, and have confidence in it. Moreover, a defined data governance regime shows that you have systems in place for collecting, storing, maintaining and gathering information correctly. It also enables you to respond to new and updated regulations as required in a structured manner and reduces the need for a one-off reactionary data management project every time a new regulation or compliance requirement comes up.
However, like any process or way of working, for a data governance policy to be effective it needs to be embedded into the culture of the business. Processes and systems for updating data need to be thoroughly explained and the importance of maintaining its accuracy emphasised continuously.
Effective data governance is reliant on data integrity, uniformity and correctness. To get there, organisations must start with a firm understanding of their data flow and lineage. Without this thorough understanding of where the data has come from, it is difficult for an organisation to vouch for the quality of its data and for the data to be useful in a regulatory context.
For example, in a legal case, understanding the origin of a piece of evidence, including who handled it, for what purpose, and how it was used, is critical in preserving its integrity and in turn influencing its effectiveness in a court room. The same is true for data. To claim data quality, an organisation must first understand how the data got to be where it is.
So how can firms help engage everyone into understanding the importance of ownership and accountability for data quality purposes?
The ultimate aim is good data governance therefore it makes sense to involve as much of the business as possible, thus encouraging immediate buy-in to new and unique insights. The key is to keep it simple. Make the data and the analysis easy to understand to avoid it becoming a black box that nobody understands or wants to go near.
The questions to ask are why and not what, with the aim of using data to not just uncover business value but instead create it. The amount of data available is so vast that most things can be done if the right methodology and processes are applied.
In the case of GDPR, all organisations dealing with EU citizens will need to have a suitable data governance structure in place
With regulations proliferating at almost the same rate as data, there is help at hand. After all, almost all financial regulations are inherently data centric, whether it’s Dodd Frank, which was brought in to ensure transparency in record keeping and prevent a repeat of the financial meltdowns; the second Markets in Financial Instruments Directive (MiFID II), which attempts to regulate data collection for commodity derivatives firms; or the much talked about EU General Data Protection Act (GDPR), which is aimed at unifying and strengthening data protection for all individuals within the European Union.
In order to comply with these regulations, financial institutions, and in the case of GDPR, all organisations dealing with EU citizens, will need to have a suitable data governance structure in place. Once the groundwork is done, firms will then be able to carry out the necessary separation, analysis and distribution of their data to ensure the correct information is passed on to the correct parties in the correct form and by the correct time.
In short, data governance refers to the overall management of the availability, usability, integrity, and security of the data employed in an enterprise. An effective data governance programme includes a defined set of procedures and a plan to execute those procedures. If you don’t have this, you will struggle not only to manage your data effectively, but also to ensure compliance with the ever-growing raft of data-centric financial regulations. Organise and know your data now, and your next steps will be much less challenging.