WFIC Day 1: Practicing Patience

On paper it all sounds great. Universities are starting to introduce data management courses. Regulators are reaching out to data professionals. C-level executives are increasingly aware of the benefits of data standardization. These are all developments I have heard about today at the World Financial Information Conference in San Francisco.

But at the same time, I’ve also heard delegates raising concerns, many related to the implementation of the legal entity identifier (LEI). When I participated in round tables on entity data management and legal entity identification, I was almost a tad disappointed. In the past year, there has been so much talk about the sudden pace of change in the legal entity identification space. Now I’m more skeptical about how fast this change will occur – not in relation to the creation of the actual standard, but in relation to how it will be implemented and used. 

In the financial information community, market participants typically agree that firms can gain better insight into their business by improving entity data management, implementing a legal entity identifier. One of the round tables today looked at using an entity identifier as a primary key, with conference-goers discussing how this model could add value and help firms get a better overview of counterparty exposure.

The big question, however, is: will C-level executives listen to us? For a firm to change from a security-focused data model to an entity-focused model, they would need to have a long-term view.  Many firms are often accused of focusing on the short term instead.

In addition, there is an array of regulatory requirements being pushed out at the same time, and some are seen as being even more important to C-level executives than legal entity identification. The other issue is the scope. There is widespread agreement that the LEI has to be global, but some are concerned there will be resistance in certain markets, and that this could impact firms' decisions on how to approach the implementation.

Despite these challenges, the hope is that firms will see the LEI implementation as being more than simply a mapping exercise. Can this also be an opportunity to make changes to the overall data model and strategy? The ideal situation would be if the LEI could be a catalyst for change, as firms will have to allocate budgets to the LEI project anyway. The conclusion at the round table was that since they need to spend, why not spend it the right way?

When firms do identify what spending the LEI budget the right way means to their business, the LEI project can potentially make a significant impact. This is perhaps where the real business benefits will be realized.

But it is not a given that firms will go that extra mile when the standard is first introduced. Like everything in the reference data industry, it will take time. I originally thought the LEI and entity data management would be the exception to the rule, but after today, I’m not so sure it is. I’m back to being patient.