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Regulatory Risk

How to manage data for regulatory success

Marion Leslie

13 Jul 2016

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Navigating the sea of regulatory change is a complex task. Strategic data management can simplify the process, so why are many buy-side institutions reluctant?

The zero-tolerance approach of regulators since the financial crisis means institutions are having to master complicated data requirements with no room for error.

For the buy-side community, the list of legislation facing asset managers and insurance companies is vast and includes MiFID II, EMIR, AML/KYC, Shareholdings Disclosure Rules, Solvency II and AIFMD to name just a few.

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Most, if not all, regulations force institutions to get to grips with new data requirements. In order to deliver on the multitude of rules and regulations, taking a holistic approach to data management is essential.

Visit the Thomson Reuters Regulatory Portal to optimize your data commonalities and solve multiple regulatory challenges

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Piecemeal approach

In a recent survey covering 66 data management executives from financial institutions, 84% of buy-side participants strongly agreed (and the remaining 16% agreed) that in order to meet the new regulations taking a holistic approach to data management would be a significant benefit.

This not only requires data management plans to meet and understand the current data requirements caused by regulation, but also an infrastructure that enables a future-proofed capability to deliver on any new regulatory data requirement, whether ad hoc or scheduled.

Despite acknowledging the significant benefits that could be attained, only 21% of buy-side firms reported having a strategic plan in place, while 53% described their approach as piecemeal. The remainder said they had a strategic approach for some, but not all, regulations.

Obstacles to data harmony

Why is there such a gap between the ideal and reality? If so many buy-side institutions recognize the benefits of strategic data management, why have they have not yet harnessed them?

There are a number of barriers.

The biggest is an organizational and cultural one. The more complex the organization and the more they adopt a ‘minimum compliance’ approach (rather than a ‘strategic’ approach), the more difficult it is to implement a holistic strategy.

The sheer cost of the changes required — combined with the difficulty in securing the budget as investment fatigue sets in — also presents challenges.

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Lack of consistency

The lack of data definition, standards and consistency across multiple source systems and external vendors means there cannot be a single version of the truth.

Furthermore, inconsistencies amongst regulators as well as a lack of clarity and tight deadlines make compliance costlier and more difficult — hampering efforts to be more strategic.

Firms used to outsourcing their services are finding they need to get far more familiar with their service providers standards, processes, data sources and reporting capabilities.

Sustainable approach

So what can be done to alleviate this pain?

According to a recent survey, 88% of financial institutions expect to see a shift from the current firefighting approach towards a more strategic one over the next two years.

A strategic approach is expected to include leveraging a dedicated team within the enterprise to plan and execute such a strategy, and will include the repurposing of data and workflow.

One thing is for sure, finding a sustainable approach to current and future regulatory requirements is now vital to longer term business success.

Thomson Reuters and our partners can help simplify the process. We’ll show you how to reduce costs, leverage market insight and implement best practices, as well as help you optimize data commonalities to solve multiple regulatory challenges.

Complete this easy-to-use diagnostic tool to gain access to a personalized regulatory analysis report.

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