Three steps toward achieving standardization, alignment and automation

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The speed of growth, innovation, and change in the banking industry has always made it challenging for banks to standardize data sourcing. Several of our sources observe that operating business lines have a natural tendency to enter the data that’s most relevant to their businesses using their own definitions, formats, and methods without necessarily considering the needs of other parts of the business. Over time, this can lead to increasingly disparate data streams flowing from multiple operating units to management and to support functions such as risk, finance, and treasury—which in turn can make it costly and time-consuming for banks to gain the firm-wide view that has become so critical to their success.

To combat this tendency toward divergence and to improve data standardization, banks are turning to a combination of organizational structures, policies and controls, and technologies.

Different colors of labels“The need for an information framework has resulted in a growing trend for banks to establish a data czar, commonly referred to as a chief data officer.”

1. Standardization and alignment begin with data governance
Many banks say that standardization begins with central determination and control of data definitions, formats, and attributes. Often a data-governance body with representation from finance, risk, IT, and operations is charged with promulgating a unified data-governance policy and coordinating data standards across the bank.

2. Improvement through organizational, technological, process, and policy changes
The constant evolution of banks’ businesses assures that standardizing and bringing together data will always be a work in progress, but several banks say they are also pursuing major standardization and alignment initiatives, which they anticipate will lead to substantial improvements.

3. Data alignment yields business benefits
It can be difficult to attach a monetary value to the contribution that faster, more flexible reporting makes to decision making, because the cost of avoiding a bad decision is not knowable.

However, the benefits that financial institutions stand to reap from better data alignment help to make the long time frames for improvement worthwhile, say executives. For banks that are struggling to meet reporting requirements using many manual workarounds, seeking improvement may not be optional. Other banks are seeking improvements in alignment because they will ultimately help free resources in finance for more valuable work. To make the most of always-scarce resources, banks are working to make sure that their investments in regulatory compliance also help improve data alignment and automation.

More insights on what is happening:

  • Four reasons IT complexity at financial institutions is unparalleled
  • Three effects of the financial crisis on banks’ reporting and analysis requirements
  • Three steps toward achieving standardization, alignment and automation

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Banks’ moving target: sourcing, analyzing, and reporting data in challenging times.