| Data quality found to be key risk management issue in banking sector A study of more than 1,700 banks from 63 countries, conducted by AIM Software, the Vienna University of Economics and sponsored by Reuters, has revealed that improving data quality is regarded as a key issue for risk management – and that regulatory requirements including Basel II and Sarbanes-Oxley are driving substantial investments in IT.
These efforts are being driven, besides cost pressures and increased transaction volumes, by regulatory requirements such as Sarbanes-Oxley and Basel II, which will be implemented in more than 100 countries within the next few years. "The results show that companies realize the close connection between comprehensive data management and efficient risk management," explains Martin Buchberger, head of marketing at AIM Software. "The new survey is the first to take a truly global perspective. Former surveys were usually based on the US and Western Europe, yet now for the first time regions like CEE, Central and South America, Australia, Asia and the Middle East are covered", states professor Klaus Arnold from the Vienna University of Economics. "The effort that financial institutions are making to improve their data management is noticeable," Buchberger continues. The areas where most banks reported plans to substantially improve data quality within the next two years were the Middle-East (79 percent), CEE (84 percent), Asia (88 percent) and Central & South America (92 percent). The focus of banks' efforts lies in the automation of reference data and corporate actions processing, the areas from which the largest costs originate. In fact, one out of ten institutions still employ more than 50 people for reference data management. ISO 15022 and its successor ISO 20022 or UNIFI (formerly known
as ISO 15022 The importance of such standards is rising steadily with globally 17.4 percent of the respondents already using ISO 15022, with especially high recognition rates in Asia (24.4 percent) and Western Europe (20.9 percent). The move towards ISO standards is underpinned by the pilot phase finished recently by SWIFT, comprising Telekurs, FT Interactive Data, Reuters, Mergent, NextInfo and WM Datenservice as participants to test the transmission of provider data through ISO 15022 message formats. Looking further at standardization, 42 percent of the survey respondents plan to purchase an off-the-shelf data management solution or to buy and adapt a solution to their own needs. 26 percent of the respondents rely on proprietary development. "This is a significantly smaller proportion than in the past, when data management was still regarded as an internal core competency. This may be due to a higher demand of functionalities that cannot be developed anymore by a single bank in a cost-efficient way", comments Buchberger. With respect to outsourcing, 18 percent outsource the development of a system and 14 percent the data processing itself. Outsourcing is especially popular in North America, the Middle East and Asia. 54 percent regard workflow management as the major objective of data management with event reporting ranking second (52 percent). "This is certainly connected to the increasing number of processed corporate action types since financial institutions realise that they are facing serious operational risk and huge potential losses in this area", Arnold explains. What is specifically interesting here is that corporate actions made a huge leap forward compared to previous surveys. On a global perspective, 29 percent of the respondents currently plan to increase the degree of automation for reference data, 29 percent for corporate actions and 24 percent for pricing data. Altogether not less than 64 percent of the interviewed institutions are intending to enhance their level of STP. The full results of the survey are available at
•Date:
19th October 2004 • Region: Various •Type:
Article •Topic: Operational
risk |
