Identifiers and standards ensure those attributes can be met. The challenge facing institutions, however, is that such rules often conflict or don’t exist. At the most fundamental level, for instance, company names may not be identically represented across datasets, meaning any analytics or other process that incudes that data could be skewed.

Industry Leaders

The webinar will see leading figures from the sector delve into the importance of identifiers and standards as well as provide context about their uses and benefits. On the panel will be: Alexandre Kech, chief executive of the Global Legal Entity Identifier Foundation (GLEIF); Robert Muller, director and senior group manager, technology product owner, at BNY; Emma Kalliomaki, managing director at Derivatives Service Bureau (DSB); and, Laura Stanley, director of entity data and symbology at LSEG.

“Identifiers and standards play a critical role in data management,” GLEIF’s Kech tells DMI. “They facilitate clear identification and categorisation of data, enabling efficient data integration, sharing, and analysis.

Without them financial institutions, corporates and other legal entities, would struggle with several challenges, he said.

Among those pain points are data inconsistency resulting from different systems using different naming conventions, which would lead to difficulties in data reconciliation and integration, and operational inefficiencies, with manual processes being used to verify and match data increasing the risk of errors and operational costs.

Additionally, Kech said, compliance risks that stem from fragmented and inconsistent data would prevent regulatory requirements to be met effectively; and, limited transparency would make tracing transactions and entities accurately difficult, potentially hindering risk management and auditing processes.

In essence, this would erode trust and reliability in the data, said DSB’s Kalliomaki.

“That is fundamental for firms to fulfil a lot of functions, but regulatory reporting is one that comes with great consequences if not undertaken properly,” she tells DMI.

“When it comes to having data standards, everyone is very aware that to better manage your data, to better assure the quality of your data, to ensure consistency alignment harmonisation with your counterparties and to mitigate the number of omissions and errors you may have, having standards is much more effective from a data management standpoint.”

Growing Need

“The amount of data that financial services firms are engaging with in their financial instrument processes is growing exponentially. Therefore, the need for data standards and identifiers is growing alongside this,” said Stanley at LSEG, which supports a number of identifiers, enabling delivery of a firm’s existing and evolving use cases.

LSEG issues proprietary identifiers such as SEDOL and RIC and acts as an National Numbering Agency for UK ISIN codes, is a globally accredited Local Operating Unit for LEI codes and recognises the importance of standards across the ecosystem and beyond regulation.

“At LSEG we acknowledge the potential of data when shared, the PermID is fully open and acts as the connective tissue that enables us to identify different objects of information and stitch data sets together.”

More Than Compliance

With robust identifiers and standards in place, the full value of data can be extracted. Among the benefits expected to be discussed in the webinar are:

• Improved decision-making and analysis
• Lower costs from reducing the need for manual data processing and reconciliation and from accelerating transaction processing
• Innovation driven by seamless data exchange between different systems and organisations
• Enhanced business agility and competitiveness that comes from providing reliable data for strategic planning and risk management.

“I see financial institutions using data standards and identifiers – beyond compliance – to a great extent,” says BNY’s Muller. “There are a number of best practices firms can employ, for instance strategy, design and education, to ensure standards and identifiers deliver value through associated business cases.”

With regulatory demands likely to increase over time the need for common identifiers and standards is expected to grow in importance and lead to harmonisation across borders.

“As a broader community, we all have to be willing to look at the greater good rather than commercialisation or IP-related aspects,” says Kalliomaki. “That harmonisation of us working together collaboratively is key.”

• A-Team Group’s How to Maximise the use of Data Standards and Identifiers Beyond Compliance and in the Interests of the Business webinar will be held on July 18 at 10am ET / 3pm BST / 4pm CET. Click here to join the discussion.

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The vLEI Technical Advisory Board will help stakeholders seeking technical, governance and developmental support. Its membership is drawn from expertise within companies including Accelerate, Esatus and Prosapien and will be chaired by GLEIF IT head Christoph Schneider.

The vLEI is a cryptographically secure digital representation of LEIs, the internationally recognised 20-digit code associated with companies around the world. A vLEI enables automatic verification without the need for human checks. GLEIF created the vLEI to help financial and other institutions organise entity-specific data within their systems.

“We have assembled the vLEI Technical Advisory Board to provide this new ecosystem with the best possible chance of succeeding,” said GLEIF chief executive Alexandre Kech. “By connecting the experts and creating the strategic partnerships that will evolve the vLEI’s supporting infrastructure, we aim to establish this system as the fundamental enabler of digital trust across the many value chains that underpin our global economy.”

System Growth

GLEIF said the new board would help accelerate the growth of the vLEI ecosystem by promoting its scalability and technical interoperability. It would also help to promote new use cases and build partnerships with the Open Source community. The board will meet once a month.

The vLEI is built on a chain of trust that is rooted back to GLEIF to provide verified proof of an entity’s identity. The vLEi infrastructure supports blockchain, self-sovereign identity and other decentralised key management systems.

“The strong, global and scalable governance framework of GLEIF combined with the vLEI technology finally offers a once-in-a-lifetime opportunity to establish a digital trust layer for a variety of enterprise use-cases across multiple industries,” said Vasily Suvorov, a member of the advisory board and chief technical officer of Accelerate.

“This will enable a new era of IT innovation targeting solutions that can automate any intercompany business process that requires regulatory, risk, and policy compliance certainty.”

• GLEIF CEO Alexandre Kech will be among panellists at Data Management Insight’s next webinar, which will discuss how financial institutions can maximise the use of data standards and identifiers beyond compliance and in the interests of the business. Click here to register for the event, which will be held on 18 July.

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By Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation (GLEIF).

The global economy is wrestling with never-before-seen levels of identity-related fraud. Cybercrime costs in the US reached an estimated $320 billion as of 2023, according to Statista. Between 2017 and 2023, this figure has seen a significant increase of over $300 billion. According to the latest estimates, this dynamic will continue in upcoming years, reaching approximately $1.82 trillion in cybercrime costs by 2028. This increase in digital crime is causing substantial financial damage globally and destroying vital trust between counterparty organisations, particularly those operating across borders and legal jurisdictions.

The Legal Entity Identifier (LEI)

This is where the LEI comes in. The LEI is the only global solution providing organisations with reliable data to unambiguously identify companies and corporate structures worldwide. As a universal ISO identification standard and a code that connects entities to crucial reference information, including ownership structure, the LEI tackles data reconciliation problems across borders and promotes an interoperable identity standard. With more than 2.5 million entities and 400,000 relationships, the openly available LEI dataset provides crucial information about the names, locations, and legal forms of subsidiaries, parents, and company holdings. LEI data helps businesses understand who they’re dealing with.

The Global LEI System creates a never-before-seen level of transparency in party identification. It lays the groundwork for more informed business decisions, fosters growth, encourages collaborations, and deters financial crimes. By addressing inconsistencies in identifying entities, connecting a greater range of datasets, and capturing entity relationships and ownership structures, the LEI can support improved risk management and enable enhanced monitoring, reporting, and analytics.

A deep understanding of corporate legal complexity to identify any challenges

The power of the LEI is underpinned by the quality and precision of its data. A new initiative, the Policy Conformity Flag, designed to encourage all LEI-holding entities to declare and maintain all requested data in the LEI record, is poised to further drive transparency on the completeness and accuracy of reference data within the LEI record. LEIs help businesses identify entities across borders and jurisdictions quickly and easily, making global trade safer and more transparent.

The Policy Conformity Flag is a compelling opportunity to encourage and promote enhanced transparency in transactions via the current and complete reporting by legal entities of open, standardised, and high-quality legal entity reference data available to users and maximising the transparency and trust among market participants.

Entities with current and complete information demonstrate their unwavering commitment to transparency by enabling closer monitoring of transaction data and supporting greater clarity in their ownership structures. Their conforming status also signals to partners and other organisations that their LEI can reliably streamline due diligence checks, onboarding, and other counterparty processes, making them easier to do business with.

An up-to-date LEI helps ensure compliance with international regulations

A legal entity with an LEI also benefits from being fast-tracked to regulatory compliance. A diverse and growing number of regulatory frameworks have already mandated its use globally. Offering a clear-cut and accessible profile of each entity can shortcut myriad due diligence processes, many of which are routinely hampered by basic questions like ‘Who is who?’ and ‘Who owns whom?’

For businesses, simplifying and streamlining risk management, compliance, Know Your Customer and Know Your Business processes and client relationship management will result in a faster and smoother path to growth.

LEI to facilitate faster and simpler transactions and partnerships

The effectiveness of LEI data is dependent on its timeliness and accuracy, making the LEI renewal process crucial. Delayed renewals can lead to many issues, including data reliability concerns and the potential for non-compliance penalties.

The quality of data is the bedrock of trust and compliance in the international business sphere. This call for exemplary quality in organisational data is not merely a play for greater compliance. It is a gateway to untapped global growth. It invites legal entities everywhere to unite for an open, transparent, and trustworthy business environment. Because better data means better business.

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While more data is available to firms, thanks to a combination of new reporting regulations and standardisation of disclosure frameworks, the increasing variety of information needed and the volumes in which it will be delivered means that the pressure on data managers to get this information into their systems is unlikely to abate any time soon.

“We are still in the early stages, and there are still limitations in how companies report their data,” Agudo told Data Management Insight. “So there remains a need to put all that unstructured data together to make it comparable and to complement what’s missing. That means there will be a need to emulate that data through estimates and leverage other sources of information, which could include reports of other organisations, NGO information, news, asset-level data – and more. Ultimately, investors need to make sure the data sourced is fit for purpose.”

Transformation

Agudo will be among a panel of three experts on the “ESG Data Sourcing and Management to Meet your ESG Strategy, Objectives and Timeline”, webinar, which will be held on June 11. The other speakers comprise Aria Goudarzi, SVP and head of ESG data at Neuberger Berman, along with Neil Sandle chief product officer at Alveo.

The sourcing of ESG data has undergone a transformation in  the past few years. The space was initially provisioned by established financial data providers. Their one-stop-shop approach was eventually supplemented by the arrival of innovative providers of ESG-specific datasets and analytics. Clarity AI is among those, offering clients tech-based end-to-end solutions, for more sophisticated use cases and a higher degree of flexibility to swiftly adapt to changing market needs and requirements.

Other relative newcomers offer customised datasets that are focused on specific ESG themes that are becoming more central to institutions’ investment and risk processes, such as nature and biodiversity, human rights and diversity.

The chain of processes required to enable the integration of ESG data into firms’ wider data estate is something that Agudo said needs to be addressed at the sourcing stage, rather than left until it has been ingested into data management systems. But he says the challenge lies in achieving this while also adhering to the firm’s overriding needs-based data management methodology.

“You can manage data in the most standardised way possible and there are many platforms that already offer those capabilities. However, embedding  the methodology into the data management process is the challenging part,” he said. “Making sure that you process all that information and can integrate it in a way that aligns with the methodology, providing you the right insights, is difficult.”

Easier Process

Nevertheless, institutions are benefiting from a greater convergence of elements required to widen the pipeline of ESG data and increase its availability.

The creation of reporting guidelines by the IFRS’ International Sustainability Standards Board has helped to dovetail several often-competing disclosure codes into one set of guidelines. These are being integrated into regulations being constructed by regulators around the world.

And on the regulatory front, the European Union’s Corporate Sustainability Reporting Directive, which compels 50,000 companies to begin disclosing their ESG performance data, is expected to provide a template for other jurisdictions to encourage greater data submissions.

“Now that we can start measuring and understanding companies’ ESG performance better, investors need to grow their knowledge of the dependencies of all those metrics and the implications for their own investment decisions,” he said.

“It will be interesting to see the new dynamics with companies and how service providers can support answer those questions that are coming to the table now.”

• The “ESG Data Sourcing and Management to Meet Your ESG Strategy, Objectives and Timeline” webinar will be held on June 11, 2024, at 10:00am ET / 3:00pm London / 4:00pm CET. There’s still time to subscribe, by clicking here.

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With more than 100 exchanges trading derivatives and using multiple formats, managing all the subscriptions from each exchange is a tough task. SmartStream ENS recognises that missing exchange notifications in the reference data space can be costly, removes firms’ overheads of manually monitoring these notices, and delivers a consolidated list of normalised notifications that provides a cost-effective, timely, complete and accurate service.

The ENS service supports intraday notifications, publishes them immediately and helps to drive quality improvements across areas such as trading, risk mitigation, validating vendor notifications for corporate actions and feed changes.

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In the financial world, data is king. But many argue that firms are dangerously reliant on data they inadequately understand, unknowingly wielding a double-edged sword that can just as easily enrich as it can erode. This article pulls back the curtain on the murky world of data usage, examining the hidden costs of bad decisions driven by flawed information.

At a glance

• Think bad data is just typos and misplaced commas? Think again. It’s a silent saboteur, shattering profits, sowing operational chaos, and leaving reputational damage in its wake.
• Bad data hides in plain sight, silently emerging through flawed data capture, messy storage, and faulty processing. By zeroing in on these three battlegrounds, we can strategically deploy resources to better address these challenges and transform data into fuel for future growth.
• The impact to the bottom line is typically seen in four areas: financial, operational, regulatory and reputation. High-profile financial losses are just as impactful as smaller, frequent incidents that can quickly avalanche into millions of dollars in losses.
• The largest unseen cost of poor data quality is hindering technological advancement. Without clean data, AI tools are a waste of resources; with clean data they are the future of the industry.

Reliance on data
As firms are becoming more data driven, broker dealers, asset managers and companies across industries are becoming more reliant on data to support operations across the firm. Poor data quality costs organizations an average of $15 million USD per year, according to Gartner’s 2017 Data Quality Market Survey.

Data plays a crucial role in supporting the everyday critical decisions for your organization (figure 1). Beyond a collection of numbers and facts, it is the lifeblood of your business operations, influencing every aspect of your relationship with management, staff, customers and regulators.

Data guides decision-making to drive financial performance – when to buy or sell a stock or assess the risk of a credit agreement. Data delivered via management reporting provides the visibility to assess the strength of your operational performance – reliability of revenue forecasts, vendor spend. You are also sourcing data to demonstrate regulatory compliance across regulatory regimes, including incorporating new data to keep up with regulatory change. The credibility and reputation of your firm is at stake, as accurate data enables timely resolution of exceptions, control over money movements, and protection of customers from financial crimes.

Bad data is insidious

As data users, it can be frustrating to understand why data cannot be consistently delivered in a complete, accurate, and timely manner. Why is it so hard? The root causes of bad data can be pervasive, driven by a legacy of siloed solutions that were designed to meet short term problems. In addition, we can easily overlook just how complex it is to identify the data we need, when we need it, and how it will be managed. Bad data often boils down to three things: data capture, data storage, and data processing.

Data Capture – Poor data quality often manifests through problems with the accuracy or completeness of the data records captured, such as:

• Incomplete or non-conforming data: empty fields, spelling mistakes, substitutions, non-standard data values excluded from analysis or storage, data entered in the wrong fields
• Duplicate records: data brought in from multiple sources that results in duplicates that are not addressed
• Data decay: mismanagement of out-of-date or irrelevant data that continues to be used for reporting.

Data Storage – Bad data from improper data governance often manifests when there are gaps in data practices, such as:

• Data silos: data sources are often stored and analyzed separately, allowing for incomplete or inaccurate data to be consumed
• Data swamps: data needs to be updated and cleaned frequently, a lack of orchestration processes to update and organize data will result in old data being used for analysis
• Poor data versioning: gaps in approach to slowly changing dimensions

Data Processing – Under the hood, the data you use to inform critical decisions has gone through many complex processes to land on your screen. Every data pipeline is different, but often includes a set of common processes (figure 2): collection, ingestion, transformation, loading, and consumption.

If there are any gaps in workflow, tooling, or data engineering talent (or capacity), then it is likely that your data pipelines will be producing bad data. This is often seen with new data integrations and data migrations.

Additionally, the data scientists you hire get stuck dealing with these problems, spending much of their time verifying, cleaning, correcting and wrangling data. Not only are they unable to fix the underlying data issues, but also they are prevented from generating the valuable insights and predictions they were hired for in the first place.

Costs of bad data: impact to your bottom line

Bad data can result in tangible costs to your firm’s bottom line. Where can you see these costs manifest? Here are some real-world examples that highlight the importance of data accuracy and control in financial institutions:

• Financial performance – a single spreadsheet error cost JPMorgan $6.2 billion due to inaccurate risk models built on faulty data.
• Operational performance – Citigroup in 2021 accidentally wired $900 million to a group of lenders for the cosmetics company Revlon.
• Regulatory Compliance – GDPR fines exceeding €4 billion serve as a stark reminder: bad data doesn’t just violate regulations, it’s a ticking time bomb that can explode into hefty financial penalties.

Credibility / reputation of firm – data leaks aren’t just breaches, they damage trust. Can you afford to lose key customers over preventable data errors? Bad data maintenance can lead to sensitive data leaks or financial loss for a customer whose investments your firm is managing. Both scenarios can result in a hit to the credibility and reputation of the firms responsible, as well as lead to customer dissatisfaction and attrition.

Conclusion

Clean, accurate and timely data is critical to the future of every organization. It can be both the fuel for your journey and the iceberg that sinks your ship. We can see the cost of bad data manifest across organizations. While identifying and measuring the impact of bad data remains critical, delaying taking steps to address the root cause is no longer a risk firms can afford to take.

The post The Hidden Cost of Bad Data – Why Accuracy Pays Off appeared first on A-Team.

The Validation Agent programme has been live for over two years and there are now more than 15 Validation Agents operating around the world. The framework was developed to enable banks and other regulated institutions to use their know-your-customer (KYC) and client onboarding procedures to help clients obtain LEIs.

Goulven Charlès, CDO at BNP Paribas Corporate & Institutional Banking (CIB), says: “Assuming the role of Validation Agent marks our commitment to promoting greater trust and transparency between global businesses. As part of our continuous data efforts, we are deploying the LEI, thereby delivering value for our clients and across BNP Paribas CIB.”

Stephan Wolf, CEO at GLEIF, adds: “The Validation Agent role was designed to offer a multitude of benefits to any financial institution that engages corporate clients. Both BNP Paribas and its clients will benefit from enhanced client onboarding and lifecycle management processes. In addition to the value derived from the role, BNP Paribas has a clear opportunity to evolve how LEIs are used, both in response to compliance mandates, and more broadly to facilitate greater transparency between organisations around the world to support the fight against financial crime.”

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This year’s platinum award winner is Regnology for its Most Innovative Regulatory Reporting Solution. Gold award winners include Interop.io, Quod Financial, S&P Global Market Intelligence, and SmartStream Technologies, with plenty more entrants picking up silver awards.

The Innovation Awards 2024 included over 40 categories across A-Team Group’s Data Management Insight, TradingTech Insight, RegTech Insight and ESG Insight news channels. They ranged from Most Innovative Smart Trader Desktops and Workflows to Most Innovative Data Standards Initiative, Most Innovative ESG Data Solution, Most Innovative AI in Regulatory Compliance Initiative, Most Innovative Data-Driven Transformation Project, Most Innovative Financial Technology Executive, Most Innovative Professional Development Initiative, and more.

A complete list of winners and their solutions can be found in the Innovation Awards 2024 report.

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DSB user onboarding data shows European organisations are prepared to meet UPI regulatory requirements based on a steady increase in EU headquartered firms joining the UPI service. Some 246 firms have subscribed to the service across various fee-paying user types, including 122 programmatic users. Banks constitute the largest entity group at 44%, with other participants such as trade execution platforms, clearing houses, brokerages, trade repositories and data management providers also onboarded. Approximately 33% of the organisations are headquartered in the EU.

Emma Kalliomaki, managing director of ANNA and the DSB, says: “This second UPI compliance milestone reflects the momentum of G20 jurisdictions fulfilling commitments made after the financial crisis and contributing to the ongoing efforts to enhance global systemic risk monitoring through the aggregation of OTC derivatives data.”

EU UPI reporting will be complementary to the existing ISIN for OTC derivative reporting, which is important to price transparency and market abuse detection under MiFIR, and for aggregating OTC derivatives data under EMIR. This means the EU and UK will be reporting the OTC ISIN where the EMIR scope aligns with MiFIR, with the UPI being reportable for those derivatives that are part of the broader scope of EMIR.

As UPI deadlines approach, firms can prepare for reporting obligations by using the DSB’s Client Onboarding and Support Platform. The platform enables timely onboarding to the UPI service offering a range of connectivity and service options that facilitate access to UPIs across all products.

The UPI Service was launched on 16 October 2023 and has since created and made more than 1 million UPIs accessible for users.

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The vLEI is a digitised organisational identity that meets global need for automated authentication and verification of legal entities. By wrapping new and existing LEIs in digital credentials that can be verified, the vLEI offers a digitally trustworthy version of the LEI that can be used to verify the identities of legal entities and their authorised representatives across a growing number of automated interactions. Examples of known use cases include approving business transactions and contracts, onboarding customers, transacting within import/export and supply chain business networks, and submitting regulatory filings and reports.

Anders Åström, CEO and co-founder of NordLEI, comments: “The strength of the global economy lies in transparency and trust. The vLEI enables functional, reliable and ethical interactions on a scale never seen before and significantly reduces the potential for fraud and inefficiencies.”

Stephan Wolf, CEO of GLEIF, adds: “Welcoming Nord vLEI as a qualified vLEI issuer marks an important step forward for the vLEI ecosystem, reaffirming our ongoing commitment to developing the supporting infrastructure to establish the vLEI as a fundamental enabler of digital trust across the global economy.”

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