Data Opportunities Abound

Compliance initiatives based on improving the foundations for data communication in the financial industry are both a way of strengthening the foundations of data management and chances for the industry to perform better

In the week before this issue of Inside Reference Data went to press, in our online weekly Golden Copy "Editor's View" column, I called the next phase of legal entity identifier (LEI) implementation a time where an apparent crisis could really be an opportunity.

In the Lower Manhattan neighborhood around our office, Hurricane Sandy caused just such a crisis – the flooding of underground infrastructure, which Verizon seized as an opportunity to install better fiber-optic connectivity underground during the repairs, according to news reported last month on the company's own website. A feature in this issue, "Laying Compliance Foundations," draws comparisons between the regulatory initiatives firms are working to comply with – the LEI as well as Fatca and Solvency II – and the inconvenience of construction to improve utilities. Data managers working on compliance with rules are trying to cause as little disruption as possible, just as utilities ideally should plan to get all necessary work done in one excavation.

Communication between business units is essential to best plan this type of compliance work, and that lesson is also evident in another feature in this issue, "Communicate and Aggregate," which covers the role of risk management and straight-through processing demands on data managers. The list of criteria that financial firms now have to meet risk and STP needs is growing, says David Lecompte of service provider SIX Financial Information. And having the most up-to-date communication standards – such as the ISO 20022 protocol – underlying the infrastructure being built for both risk management and regulatory compliance is just like putting fiber-optic cable under the street. Both actions make better communication possible.

Lecompte also tells us in this story that the LEI is "the tip of the iceberg" for better risk management through better data management. In "Identification Breakdown?", we look at whether that iceberg has some cracks in it, as compliance professionals in the industry relate concerns about accuracy and the completeness of registrations, as well as the compatibility of LEIs being set in multiple local operating units worldwide. It's these sorts of concerns that spawned the column mentioned earlier, which asked whether problems with the LEI could really be opportunities to make the identifier more trustworthy and accurate.

The common thread in all the data issues examined in this issue is that problems – even if they rise to the level where they can be called crises – are creating opportunities that data operations professionals are, or should be, catching on to. A look through the news pages of this issue, especially when it comes to LEI, finds some examples of firms doing so – as a defense against money laundering and to collect relationship and hierarchical data.