HOW FINANCIAL SERVICES FIRMS USE TECHNOLOGY TO TURN DATA INTO ACTIONABLE INSIGHT GET MORE VALUE FROM DATA Data capitalization helps firms extract more value from data and technology to gain five critical competitive advantages Three key points 1 Don t go it alone. 2 3 Follow best practices. Invest in innovation. DATA DRIVES MARKETS Bloomberg was founded to bring efficiencies to capital markets through timely access to quality data. Over time, this mission expanded to include the role accurate data plays in market transparency, confidence and global economic growth. Today, it continues to evolve in response to post-crisis realities. One new area of focus is making the best possible use of enterprise data, whether it comes from a vendor, a proprietary internal application or a transaction. When firms act decisively on the long-held belief that data holds exceptional value, they can achieve five important benefits that strengthen any firm s competitive position. We call this data capitalization. WHAT IS DATA CAPITALIZATION? Data capitalization offers a new way to approach the familiar and complex challenges of acquiring, organizing, moving and using data. While all firms intuitively understand that data is now more valuable than ever that it is a vast, untapped resource for growth and innovation very few are acting on this in a consistent or strategic way. Data capitalization reframes the issue, offering tangible ways firms can extract greater value from data and technology, from the desktop to the enterprise.
_02 Lower TCO More efficient workflow Greater innovation Easier compliance Smarter governance How data capitalization works Together, four pillars of operational excellence enable firms to redirect more resources to strategic innovation, creating a virtuous cycle that builds a considerable competitive advantage. Data flowing through the organization comes from vendors, exchanges, proprietary tools, customers and transactions. Firms that are making the best use of this data tend to stand apart from their peers in three ways. They recognize that data distribution is not a challenge they have to solve independently. They know how radically technology and infrastructure have changed since the crisis and that new best practices have emerged. And they are willing to invest in more open, integrated, automated and transparent infrastructure. When firms do all three, data capitalization delivers all of the following benefits.
_03 LOWER TCO What the crisis made apparent was that conventional ways of acquiring and managing data did not hold up when firms were forced to do more with less. Redundant data sources and bespoke distribution systems set the stage for discrepancies among the front, middle and back office. The process of data capitalization starts with abandoning pre-crisis practices and making trusted enterprise data the top priority. When data is consistent across the business, it eliminates the cost of resolving data disputes, fixing errors and rechecking work. A more standardized infrastructure for accessing and working with data reduces operational support costs, as well as the cost of using data to meet new business needs. Consolidating data sources also helps firms avoid paying for the same data twice. Total cost of ownership (TCO) can drop even more by moving away from in-house and on-site solutions to managed services. Firms pay for the end result users getting the right data in the right place at the right time instead of paying for hardware, software, connectivity and service. All the heavy lifting of distribution is done in the cloud. This allows IT and market data teams to handle higher workloads without adding staff and spend more time on projects that differentiate the firm. Handing over control to experts in data distribution also creates opportunities to add value to data before it arrives, such as updating related fields automatically or translating identifiers, without hiring and training a separate internal team to figure out the same solution. With managed services, you don t have to invest in hardware or networks. If you want to scale up capacity or add more services, that s our problem, not yours. Ken Chin, Bloomberg Research & Development MORE EFFICIENT WORKFLOW The same conventions that complicated data consistency also wreaked havoc with firms attempting to streamline and integrate workflow across the enterprise. Natural integration is rare because firms rely on dozens of applications and systems that were not designed to work with one another. Data capitalization leads firms to move away from customized and legacy solutions and toward best practices for enterprise-level integration. These practices may be guided by vendor partners, but they are not vendor specific. They involve field-proven frameworks for integrating fundamental internal systems, such as decision support tools or compliance engines, with real-time market and reference data and analytics, as well as applications for managing orders, trades, portfolios, risk and accounting. They may involve open (nonlicensed) APIs that do not lock firms into using proprietary tools and open symbologies that make it easier to integrate security and entity data from many sources. Overall, strategy informs technology, not the other way around. The end result is workflow that is more efficient in daily practice and easier to change over time.
_04 Systems attempt to differentiate themselves by looking at data differently across the workflow. Some use derived data and apply analytics. Then other systems use those outputs as their input, or their version of the truth. Everything gets manipulated within a highly integrated enterprise workflow. But if you step back and provide a framework for enterprise integration with transparency and control, you can get closer. Brian Cunningham, Global Head of Bloomberg Connectivity & Integration EASIER REGULATORY COMPLIANCE Compliance used to be a necessary evil, or a we ll get to it task. But the massive increase in regulatory demands makes this unworkable. Regulatory awareness must be embedded across the enterprise, from the front office tracking LEIs to the middle office managing risk to the back office calculating capital adequacy. Many reports require data aggregation across business units, often according to regions or counterparties. As a result, firms need to source data from providers that address these needs. Choosing regulation-ready data makes it faster and easier for firms to aggregate positions across classifications, as well as identify instruments affected by FATCA, MiFID 2, AIFMD and many others. Firms that are taking advantage of data understand compliance can be a competitive differentiator. Asset managers with proven compliance solutions, for example, are more attractive to insurers. This is one way the process of data capitalization becomes literal. Complying with Solvency II affects how much capital institutions must withhold due to risk. The more precisely firms can articulate risk, the better they can use that capital and the more revenue they can generate. Investing in more reliable, dependable data and distribution makes it easier for firms to master the essential compliance tasks of identification, classification and valuation. With these fundamentals under control, firms can focus energy on more complex regulatory challenges, such as building the data models to comply with Basel III directives for risk aggregation and reporting. A stronger grasp of compliance data puts any firm in a better position to handle the demands of current and future regulations as well. In addition, a stronger regulatory focus on information governance demands that firms invest in the ability to control, search and retrieve both structured and unstructured data. That means firms need to start building a proactive surveillance platform one that allows them to integrate the traditionally separate worlds of trade and communication surveillance, streamline global compliance investigations and meet Dodd-Frank requirements for complete trade reconstruction in a more efficient manner.
_05 If an insurance company is evaluating two asset managers with identical performance, but one has a complete Solvency II solution in place while the other is still getting up to speed, it s an easy decision for them to make. John Randles, CEO of Bloomberg PolarLake SMARTER GOVERNANCE Easier compliance is directly related to smarter data governance. Underlying every regulation is a concern about governance: where data originates, what processes govern it, whether users are following these rules, and if so, what proof exists. Firms that pursue data capitalization will be better equipped to enumerate all the data sources, pathways, workflows and systems involved because they will have invested the time and budget to do so. They will understand that not all data is created equal. Knowing the operational purpose of data, including which data adds the most value to the business, makes it easier to set priorities and develop governance policy that is efficient, effective and enforceable. And they will be able to ensure that business strategy guides governance so that the metamodel is tightly aligned with enterprise needs and the framework helps identify potential points of inconsistency. Of course, by aligning with the managed services model, firms will also be well served to collaborate with data and technology experts who have invested heavily in practices and technologies that help ensure data quality throughout the entire supply chain. Governance is like a supply chain. It s garbage in, garbage out. But if you have reliable data organized in a sensible way that supports your business strategy, then it s much easier to demonstrate the data lineage for virtually anything regulators ask for. Devesh Shukla, Global Head of Bloomberg Reference Data Product Development
_06 GREATER INNOVATION As pillars of operational excellence, the first four benefits lower costs, smoother workflow, easier compliance and smarter governance are tightly linked. Compliance and governance concerns create urgency for more efficient workflow, which in turn helps reduce TCO. Innovation is the culmination of all of these and of data capitalization. When internal systems for data acquisition and distribution become more standardized, and in some cases hosted and managed by dedicated providers, firms can redirect more resources to strategic innovation. In other words, the real issue is opportunity cost. Top talent are not overloaded trying to develop in-house solutions to familiar challenges, which makes them easier to retain. Across the front, middle and back office, the firm s best minds have consistent access to the right data, in the desired format and at the right moment, to generate new insights and drive optimal decision making. They are not spending their days trying to work around painful data issues. Rather, they are focused on what comes next. And along the way, firms will have developed stronger relationships with data and technology providers that are eager to propose their newest and most creative ideas. For multi-asset-class trading operations looking to efficiently scale their business, the integrity and management of data across the enterprise become critical pieces of the conversation of managing a firm s total cost of ownership. Mark Gonzalez, Head of Bloomberg SSEOMS
_07 THE BOTTOM LINE 1. Don t go it alone. Recognize that untangling the knot of data, technology and integration is not what financial services firms are designed to do. Partner with experts that understand the need and have already developed proven solutions. 3. Invest in innovation If data is valuable, it needs to be a priority. Plan to invest in more flexible, open, integrated, automated, transparent and managed solutions. The return on this investment will be considerable. 2. Follow best practices. Be willing to take a hard look at legacy technology, entrenched systems and traditional modes of operation. Solution providers have worked with dozens of clients through hundreds of implementations to develop best practices. Leverage these experiences.
MORE POINTS OF VIEW The discussion doesn t end here. Experts at Bloomberg are engaging in conversations about these concepts in many ways with professionals from across the financial industry. Many firms believe a legal entity master (LEM) is an important opportunity to streamline workflow. But questions remain about ownership, technology and data governance. READ THE Q&A Financial firms are focusing on the operational purpose of data and collaborating closely with providers to gain new insight and realize the full value of current data assets. DOWNLOAD THE REPORT CONTACT US TODAY Bloomberg for Enterprise is ready to help firms capitalize on data. To find out more, contact us at eprise@bloomberg.net or visit bloomberg.com/enterprise bloomberg.com/trading-solutions Series Contributors Ken Chin, Bloomberg Research & Development Harald Collet, Global Head of Bloomberg Vault Brian Cunningham, Global Head of Bloomberg Connectivity & Integration John Mason, Head of Bloomberg Regulatory & Compliance Solutions Dan Matthies, Global Head of Bloomberg AIM Mark Gonzalez, Head of Bloomberg SSEOMS John Randles, CEO, Bloomberg PolarLake Devesh Shukla, Global Head of Bloomberg Reference Data Product Development Peter Warms, Head of Bloomberg Product Development for Global Data & Symbology BEIJING +86 10 6649 7500 FRANKFURT +49 69 9204 1210 LONDON +44 20 7330 7500 NEW YORK +1 212 318 2000 SÃO PAULO +55 11 3048 4500 SYDNEY +61 2 9777 8600 DUBAI +971 4 364 1000 HONG KONG +852 2977 6000 MUMBAI +91 22 6120 3600 SAN FRANCISCO +1 415 912 2960 SINGAPORE +65 6212 1000 TOKYO +81 3 3201 8900 The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and BLOOMBERG Order Management Systems (the Services ) are owned and distributed locally by Bloomberg Finance L.P. ( BFLP ) and its subsidiaries in all jurisdictions other than Argentina, Bermuda, China, India, Japan and Korea (the BLP Countries ). BFLP is a wholly-owned subsidiary of Bloomberg L.P. ( BLP ). BLP provides BFLP with all global marketing and operational support and service for the Services and distributes the Services either directly or through a non-bflp subsidiary in the BLP Countries. The Services include electronic trading and order-routing services, which are available only to sophisticated institutional investors and only where the necessary legal clearances have been obtained. BFLP, BLP and their affiliates do not provide investment advice or guarantee the accuracy of prices or information in the Services. Nothing on the Services shall constitute an offering of financial instruments by BFLP, BLP or their affiliates. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marks of BFLP or its subsidiaries. 2015 Bloomberg Finance L.P. All rights reserved. 53990944 0713