Data quality in finance: from compliance to confidence

Neil Vernon at Gresham makes the case for prioritising data quality in finance

 

In today’s dynamic financial landscape, data integrity is essential for operational efficiency, risk management, and regulatory compliance. Financial institutions handle vast amounts of data daily, and the accuracy, consistency, and reliability of this information are crucial for smooth operations. High-quality data underpins every critical function, from transaction processing to compliance reporting.

 

Yet, ensuring data integrity is not just about maintaining accurate records; it’s about building trust with clients, stakeholders, and regulatory bodies. This involves a comprehensive approach that includes meticulous data lineage tracking, proactive management of data quality, and leveraging solutions like Data as a Service (DaaS) and, last but not least, robust data governance frameworks. 

 

According to Gartner, 80% of organisations trying to implement digital transformation will fail because they do not take a modern approach to data governance. By focusing on all these areas together, financial institutions can enhance operational efficiency and maintain a competitive edge.

 

The foundations of data integrity

At its core, data integrity ensures that information remains accurate and consistent throughout its lifecycle - from initial acquisition to archival. Implementing effective data governance policies is essential. These policies define clear roles, permissions, and change management procedures, minimising errors and unauthorised alterations while fostering accountability.

 

Data lineage plays a critical role. By tracing data’s journey through systems and processes, institutions can pinpoint errors and discrepancies. Understanding data flows enhances transparency and facilitates quick issue resolution, vital for both operational efficiency and regulatory compliance.

 

Maintaining high data quality is another key aspect. Rigorous data validation processes, regular audits, and advanced real-time monitoring technologies help detect and address anomalies promptly. This proactive approach reduces the risk of disruptions caused by inaccurate or inconsistent data, ensuring continuous integrity of operations.

 

Leveraging Data-as-a-Service

Integrating data from multiple sources adds complexity. Different standards, formats, and quality levels make consistency challenging. Implementing robust data management platforms that harmonise data and provide a unified view is essential.

 

Data-as-a-Service (DaaS) solutions play a pivotal role here. DaaS allows institutions to access and manage data more efficiently through customisable feeds and integration capabilities, adapting to changing business needs and regulatory demands while maintaining high data quality.

 

DaaS offers flexibility by tailoring data delivery to specific requirements and integrating seamlessly with existing systems. By receiving data in preferred formats, organisations reduce manual efforts for data transformation and minimise errors. Moreover, DaaS solutions often include real-time monitoring and alert systems that facilitate proactive management and swift issue resolution.

 

Embracing automation and advanced technologies within DaaS platforms significantly improves data integrity. Automated data processing reduces human error, while artificial intelligence and machine learning detect patterns and anomalies missed by manual processes. These technologies enable real-time analysis and decision-making, enhancing operational efficiency.

 

Adapting to challenges

Financial institutions face challenges in maintaining data integrity. Resolving exceptions when records do not reconcile with counterparties is a significant hurdle. Discrepancies lead to transaction delays, increased costs, and erosion of client confidence. High-quality data ensures smoother reconciliation, reducing such exceptions and associated costs.

 

Integrating Environmental, Social, and Governance (ESG) data presents both challenges and opportunities. ESG data is increasingly important for asset allocation, reporting, and compliance. Onboarding this data, ensuring its quality, and tracking its lineage require clear governance and powerful technology to manage disparate datasets. DaaS assists by providing scalable solutions that handle large ESG data volumes, aligning with existing structures and compliance requirements.

 

Adapting to evolving regulations like MiFID II and MiFIR is an ongoing challenge. Financial institutions must ensure data governance practices remain compliant without compromising efficiency. The flexibility offered by DaaS is crucial in accommodating new demands seamlessly, allowing updates to data feeds and adjustments to reporting standards with minimal disruption.

 

Focusing on data quality metrics is essential for continuous improvement. Establishing key performance indicators (KPIs) for data quality allows institutions to measure progress and identify enhancement areas. Regularly reviewing these metrics ensures that governance practices remain effective and aligned with organisational goals.

 

High data integrity yields significant advantages. It streamlines processes, reduces manual interventions, and improves decision-making by providing reliable data. Enhanced compliance and risk management are achieved through precise reporting and the ability to mitigate risks promptly. Demonstrating commitment to data integrity strengthens stakeholder trust, which is invaluable in building long-term relationships and maintaining a positive market reputation.

 

In an industry where every second counts and the margin for error is slim, data integrity is essential for operational excellence. By investing in strong data governance frameworks, leveraging advanced technologies, and adopting proactive data management strategies - including the use of DaaS - institutions can navigate today’s complex financial landscape.

 

As the sector evolves with increasing data volumes, new regulations, and ESG considerations, maintaining data integrity is not just a compliance necessity but a strategic imperative. Financial institutions that prioritise data integrity and embrace solutions like DaaS will enhance efficiency, manage risks, and build enduring stakeholder trust, securing their place in a competitive and ever-changing market.

 

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Neil Vernon is CTO at Gresham

 

Main image courtesy of iStockPhoto.com and Sean Anthony Eddy