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CUT THROUGH VOLATILITY AND MAKE BETTER INVESTMENT DECISIONS WITH ALTERNATIVE DATA

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Tomas Montvilas, CCO at Oxylabs

 

Increased speculation, surging trade volume and a rapidly changing economic landscape are causing an unprecedented level of volatility in the markets. Investment professionals are increasingly looking to alternative data for clarity and to make better-informed investment decisions.

Despite record unemployment and a rapidly declining economy, the stock market is experiencing record highs across almost every sector. This perceived decoupling of the investment markets from the greater economy is concerning investment professionals looking to safeguard their funds from inflationary pressures and other serious issues that threaten to devalue portfolios of all sizes.

No one seems to be immune to the current events – and indeed, short-term market fluctuations are leaving investors of all types concerned about the future.

 

Alternative data provides clarity

Alternative data refers to data from non-traditional sources such as social media networks, forums, or credit card information. Besides providing timely and unique insights, alternative data can provide drilled-down, specialised information that can’t be obtained from traditional sources.

 

Alternative data is critical to decision making 

Technological advances have resulted in massive changes to the investment industry, ranging from how operations are conducted to the number and variety of investment instruments.

Investors of the past often based their decisions on the potential of an entity or commodity, such as a national expansion of a restaurant or clothing store or an investment in a growing public utility. More often than not, these decisions depended on sound economic and financial analysis along with geopolitical insights.

Today, the market has been turned upside down by algorithmic trading, derivatives speculation and over-valuations never seen before in human history. Add in trillions of dollars of government spending, currency devaluation and Covid-era economic restructuring, and we have a recipe for unprecedented volatility that threatens the livelihoods of investors on a global scale.

Alternative data has become an irreplaceable part of decision making. There are numerous benefits associated with alternative data:

  • Faster signal transmission. Traditional data sources like company filings, earnings calls, and other statistics provide data periodically and often with months of delay.
  • Increased granularity of data. Access to highly specific data points can reveal potential niche investments.

 

Alternative data can protect investments and identify new opportunities

While most day traders and speculators rely on short-term data and rumours, long-term traders look to alternative data for insights that help them make sound investment decisions.

Alternative data sheds light on real market events. It cuts through the irrational noise being made in the markets and gives investors insights into actual economic events that help them identify viable opportunities in emerging markets and sectors.

Recent events in the stock price fluctuations of GameStop can serve as a great example. As investor frenzy pushed GameStop prices to new heights, investment giants realised that keeping track of ticker sentiments on the internet can be a powerful tool for creating Alpha. There are now publicly available sources that track the ticker mentions in the subreddit /r/WallStreetBets (registration required).

 

Choosing alternative data types 

Investors and financial analysts looking to harness the power of alternative data have an entire world of information waiting to be explored. Consider the possibilities: According to Cisco, 90% of the data we have generated has taken place in the last two years and by 2022 4.8 billion people will use the internet across 29.5 billion networked devices.

Tracked sources are ever-expanding and diversifying to include social media sites, IoT, geolocation, e-commerce activities, data from government agencies, and much more. Some key areas of interest can include:

  • Supply chain data
  • Patent valuations and indicators
  • Environmental, Social and Governance data
  • Country risk scores
  • News and internet sentiment
  • Clinical trial milestones
  • Building permits
  • Government procurement and public contracts

 

Where to get alternative data

Sources of alternative data are numerous and growing, and determining the right choice largely depends on the data’s end purpose. Corporations across all sectors rely on firms that aggregate data from IoT, consumer websites, government sources and more, to enhance marketing strategies for their clients.

These data firms do not confine their scraping efforts to extracting data sets from standard sources. Many extract information from non-traditional sources such as tweets, turning them into alerts that gauge sentiment for use by traders, brands and other organisations that require real-time data. Others scrape application data to provide insights to brands that can aid product strategies and marketing campaigns.

 

How to extract alternative data

For most businesses, there are 3 options: buying alternative data from aggregators, outsourcing the scraping or building an in-house scraper. Buying or outsourcing data acquisition is simple as long as you are willing to pay a premium.

Extracting alternative data is a multi-faceted process that requires a scraping program and proxies. Success often depends on flexibility, so all data points are extracted successfully. Since all data sources are different, a hard-coded and inflexible schema is likely to result in serious issues during the data extraction process.

The use of high-quality, ethically-sourced proxies is essential to distribute requests and avoid server issues. The choice of either datacenter, residential proxies or next-generation solutions that leverage AI and ML technology depends on the type of data being extracted and its source.

Datacenter proxies offer unlimited traffic and are ideal for scraping raw public data with greater speed and stability. Residential proxies are suitable for more complex targets. Complex layouts requiring specialised customisation can be successfully scraped with the use of next-generation solutions powered by AI and ML technology that can extract public data with higher efficiency and greater success levels.

Not all businesses have an in-house scraping department. Financial organisations and investment firms can leverage ready-to-use solutions that provide data ready to be analysed. Besides freeing them from the complexity of data extraction, these tools allow companies to focus resources on analysing the data rather than focusing on the extraction process itself.

 

Wrapping up

The age of big data has arrived, offering solutions to investment professionals looking to cut through the prevailing stock market volatility to reveal clarity for better decision making. Alternative data, along with innovative scraping tools and proxies, can empower investors to make better decisions that can endure short-term instability for better returns over the long term.

 

Banking

LEGACY INFRASTRUCTURES MUSTN’T HOLD BACK INNOVATION IN FINANCIAL SERVICES

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By

Ian Perry, Principal Solution Architect at Zscaler

 

We are living in a changed world; one of hybrid home/office work and customers who may never return to bank branches and the services of the high street. According to RFi Group, 73 per cent of UK consumers interact with their main bank via digital banking at least once a week, and only 23 per cent believe nothing can replace what they get in a branch. Meanwhile, institutions including JP Morgan, HSBC and Nationwide have all indicated an intention to retain new higher levels of homeworking.

Now that employees work from a multitude of locations and customers bank and manage their money online the race is on to adapt processes, systems and support structures for safe, secure and productive homeworking and digital access for customers. Inevitably, this calls into question legacy infrastructures in financial services and how they might impact digital progress.

 

New tools, old systems?

The question is, how can banks and other financial institutions securely provide a higher level of remote access to their systems and applications when incumbent infrastructures were developed for an entirely different time?

Of course, the first thing to note is that banks aren’t coming at the problem from a standing start. Oft-cited legacy infrastructures have been added to over time so that many set-ups are now an on-premise/cloud-hosted hybrid. In fact, the finance sector has invested heavily in cloud infrastructures and cloud-based office applications.

The issue is how to harmonise this set-up so that it works for users and organisations as a whole. Here, there is work still to be done. It’s often the case that core banking applications remain in mainframe on-premise networks, whilst other operational tools reside in the cloud. Cloud-based Office 365 is a case in point. It supports digital working, as organisations need it to, but a range of its benefits and functions are at odds with legacy network setups.

Inevitably, when a product or service innovation reaches implementation planning stage, the starting point is the existing network, its systems and processes. The hard part is flipping this approach to assess what the resulting experience will be from the user point of view, but that is exactly what’s needed. It’s an approach that competing market disruptors have been ideally placed to adopt from day one.

However, that needn’t mean that financial institutions must completely overhaul their legacy infrastructure – something that would be expensive and complicated. They can still fully capitalise on the benefits of cloud-based services, among them flexibility, productivity, business continuity and the right customer and user experience.

 

Zero Trust without friction

One way is to take a ‘Zero Trust’ approach. As a result of recognised risks, 72 per cent of companies are prioritising the adoption of such a security model. This resets a data security approach from one that traditionally secured the perimeter to one that protects users, devices and business resources.

It’s a shift in emphasis from securing the network to securing each access and doing so without introducing friction into processes for users. We can think of legacy digital protection methods as a visitor getting a key from reception and being allowed to wander around the building, and compare that to a frictionless cloud experience in which a security guard shows the visitor directly to the room they need.

The Zero Trust model lends itself to high levels of remote access, which is exactly the situation organisations are now in. Employees work from anywhere, from a range of devices, and customers access services previously provided in-person online. Applications are no longer exclusively within the data centre, they are outside the network perimeter meaning that traffic must be enabled to run securely through the internet, rather than through corporate IT. Doing so not only equips organisations for the way things are today, it can also reduce the cost of individual site maintenance and enable the full benefit of cloud-based tools.

The technology now exists to make high levels of security completely invisible and so, with a growing number of security processes now taking place in the cloud, educating customers will be key. The industry must come together to improve user interfaces to signal what’s taking place behind the scenes.

With the right security approach, financial services can deliver on new access priorities to support their workforces and serve customers. Convenience, as well as security, should be the aim along with a strategy that ensures legacy doesn’t hold back innovation. That way, banks and other finance institutions can begin to fully capitalise on the benefits of cloud, adapt to meet customer demands as they evolve and compete in a disrupted market.

 

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Finance

HOW CFOS CAN TAKE A HOLISTIC APPROACH TO ENTERPRISE AGILITY

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By

Frederic Portal, Financials Product Marketing Director, at Workday

 

Whether brought on by a market shift, technological innovation or as we have seen over the last year, a pandemic, change in business is constant. But to survive it, or even thrive in it, organisations must find a way to adapt rapidly, while remaining strong and stable in the long-term. This is where enterprise agility and the CFO come into play. In theory, the concept of enterprise agility — a company’s ability to outperform the competition and drive growth in new, ambiguous situations by learning and adapting — sounds like something every business should inherently do. Yet, many are trying to introduce technology or implement processes before defining and establishing what agility really means to them as an enterprise. In other words, embracing agility should be a holistic approach and crucially must be led by the CFO. The CFO and financial team are instrumental in making sure that a business can lead digital transformation, steer through uncertainty and ultimately, embrace a culture with agility at its core. However, in order to achieve enterprise agility successfully, there are some simple factors that a CFO should consider when guiding their organisations to become truly agile.

 

Enterprise agility starts with the CFO

The last year made it clear that the finance function is leading business recovery. In fact, a Workday survey with C-suite leaders showed that 37 percent of respondents agree that finance is the function most likely to influence digital growth in a business. Overnight, CFOs and their teams had to rethink their processes and leave behind legacy technology in order to keep up with the continuous change that the pandemic now demands. Naturally this prompted a company-wide transformation.

To make sure this transformation towards agility doesn’t stop at technology adoption, CFOs should put practical steps in place, working in collaboration with all senior leadership, from IT to Sales and HR, to build a plan that will guide a wider change within the business. Once a plan is in place, it must be communicated and then reinforced to the rest of the workforce by providing them access to real-time data and cloud-based models. Led by the CFO, this will give crucial insight into payroll, cash flow and planning scenarios. In turn getting the entire organisation on board, creating uniformity and ensuring teams are all working from the same source of truth to move the business forward.

 

Embracing an agile mindset 

When incorporating new agile processes, CFOs must work with all business leaders to define and integrate an agile mindset. Enterprise agility isn’t just a process, it needs to be baked into the heart of the organisation — and its digital transformation agenda — so that teams across the business embrace qualities such as quick thinking, being perceptive and taking action. Adopting this way of thinking and behaving is the foundation for any agile organisation and must begin with the finance department.

Take Aon as an example. The multinational British professional services firm sells a range of financial risk-mitigation products, including insurance, pension administration, and health-insurance plans across 120 countries. By March 2020, COVID-19 resulted in the company’s entire team working from home, which meant Aon’s finance team had to do a fully-remote close. While this had never been attempted before, Aon had baked agility into its financial processes by investing in the right cloud-led, and agility enabling technology. With up to date data, and transparency across the regions, Aon’s finance team was able to close remotely, with one region even being able to close a day early.

 

Empowering agility 

Transparency and accessibility are also key to enterprise agility. So, it’s critical that CFOs empower all departments to work from the same data sources, assumptions and outcomes in their workflows. It is only by prioritising digital transformation and having technology structures up-to-date, that businesses can experience real results, and fast.

Take Netflix, for example. Even in this streaming powerhouse there were improvements to be made to back office processes. Netflix’s back office systems had usability issues due to clunky workflows and limited visibility. Led by the CFO and investing in transforming the back office into one unified system, Netflix was able to introduce an agile mindset across the business that was vital in turning this around. For instance, every time Netflix creates an original show or movie they have to create a legal entity and set up the banking and with Workday it just takes minutes to add it to an existing framework. Implementing the right technology resulted in more efficiency, more agility and fewer silos among the IT, Finance and HR teams.

 

Taking a holistic approach to enterprise agility

The disruption of 2020, and impact COVID-19 has had, is showing no signs of slowing down in 2021. It is simply no longer enough to just deploy new technology or processes with hopes of becoming  agile. In order for an organisation to truly embrace agility, it must take a holistic approach and proactively adopt an agile mindset across the entire organisation and its way of working. This is where the CFO plays a pivotal role.

 

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