As 2013 comes to a close, Steve Engdahl, senior vice president of product strategy at GoldenSource, sees 2014 as another big year for data, particularly in the sense of collaboration.
In particular, Engdahl thinks a shared service utility will make headway in 2014 as a way to make data more efficient and meet regulatory needs.
“If you look at the characteristics required for a shared service utility, you have to be able to operate at a high degree of scale because you’re not just processing data for one institution anymore; you’re processing data for multiple institutions. So you need to have a platform that can scale up very efficiently and can handle it in terms of performance and throughput,” says Engdahl.
Rather than having information siloed in various business lines, a shared service utility would increase transparency for all participants.
“One of the key benefits is managing risk data and aggregating data for risk analysis,” says Engdahl. For example, a central platform could pull in information from each line of business and discover that a particular subsidiary might be a child entity of a parent company that a firm has swaps trades open with, or another subsidiary is an issuer of some bonds the firm holds. “All of those different relationships you need to be able to link together,” he says.
Plus, a shared service utility could make it easier to supply information for regulatory purposes.
“Using the LEI (legal entity identifier) as an example, one of the challenges is aggregating data across different portions of your organization so you really can look at a customer and all your relationships with that customer or that counterparty. Different lines of business in a large firm could all know some subsidiary of that customer but not know that they all related together,” says Engdahl.
Regulation is also leading to more vendor solutions, which could lead to further collaboration. Particularly, there has been an influx of reporting tools designed to help with compliance for regulations such as AIFMD or FATCA. While GoldenSource has not announced any particular partnerships, there is potential for linking up with a reporting tool in certain cases. “Where we come in from the other side of things is we’ll help gather together and get it into a usable state all the data you need. We’re not the system that’s actually doing the filing,” says Engdahl. “So in that case, it’s very complementary to say, ‘Let’s have us put the data together, and then we’ll put it into one of these reporting packages to actually do the reporting.’”
Although there is an upfront cost for firms to compile all the data, whether it be for regulatory needs or anything else, Engdahl sees an extended benefit.
“[O]nce that’s done, then they find they also have a good, clean dataset that’s worthwhile to feed into the front office for their portfolio analysis. They have a clean dataset that can be used for their accounting practices as well. And so that initial upfront investment is not just for one purpose. It’s something that you can leverage over and over and over around your organization. And the more you do that, you reduce reconciliation breaks and all sorts of other trade failures and other manual activities around your organization,” he says.
In addition to compiling and sharing data, Engdahl also thinks 2014 will be an important one for a new standard, the Financial Industry Business Ontology, which is an initiative from the Enterprise Data Management Council (which GoldenSource is a part of) and Object Management Group to standardize financial industry language.
“I think this will be a year of adoption for FIBO,” says Engdahl. “There are some key proofs of concept going on with regulators where they can express their regulation in FIBO business terms, and then that will make it clearer for any financial institution who needs to comply to understand exactly what the regulator is looking for. I think a key thing for us at this point and for the EDM Council is how quickly can we get to that point of having tangible use cases, actual regulations that are issued using the FIBO terms, actual use cases of financial institutions who are using it and demonstrating the savings they can get.”
GoldenSource has already mapped its platform to FIBO, and Engdahl says that there has been some in-house use from organizations across business lines. “We haven’t yet seen the leap to using it either for institution-to-institution communication outside your four walls, or for communication to a regulatory body,” he says. “It will be interesting to see what progress we can make on that in 2014.”
Shared Data Could Gain Traction in 2014
As 2013 comes to a close, Steve Engdahl, senior vice president of product strategy at GoldenSource, sees 2014 as another big year for data, particularly in the sense of collaboration.