By Neil Vernon, CTO, Gresham Technologies
The idea of having one reliable data source has long been the goal for financial institutions, with data confidence at the forefront of this golden approach.
But conversations surrounding data quality are changing, and the practicality of a single version of truth might be something to reconsider. While a golden source can certainly help with data quality and confidence, it can also have negative implications, such as stifling innovation.
In an age where firms must do it all, when it comes to a golden source, they must ask the golden question: do the benefits outweigh the drawbacks?
A golden source: the ultimate standard
Internal data repositories were the original focus of golden sources – where the key to success is the timeliness and accuracy of a firm’s reporting. But because firms’ ability to report accurately, on time and in full is often bound up with that of their counterparties – as the recently introduced Consolidated Audit Trail regulation demonstrates – problems can arise.
To tackle this, discussions have been reverberating throughout the industry over whether an industry-wide initiative – where golden sources are widely accessible to firms – is in fact a good idea. When properly managed, a single source of truth for regulatory reporting could minimise error rates dramatically. It would also reduce and potentially eradicate the need for counterparty communication, as both sets reporting would stem from the same source.
The weight of gold
However, the structure and rigidity of a golden source – the elements that make it so robust and reassuring – can also be its downfall. Due to firm management and usage requirements, the ability to experiment within the confines of a golden source is limited – stifling innovation and impeding on the fail-fast approach the industry has begun to embrace.
It is also worth considering a somewhat philosophical fact of life: everyone’s truth is different. The perspective through which you should be analysing your data depends entirely on the questions you are asking the data to answer. Consequently, a source of data that might be golden for one organisation may be nothing more than lead for another.
Considering alternatives
If working from a golden source is not as practical as once thought, what are the alternatives?
When it comes to internal data, having a go-to data source is certainly something to strive for, but a standardised, all-purpose solution might not be the most practical method. What firms should consider instead is introducing a suitable control system to prevent a drop in the quality of data. Utilising processes that provide a clearer view of the data lifecycle allows for simpler data traceability and will make managing data lineage that much easier. It’s also imperative that education for data consumers is a priority, so that when the data is accessed, the appropriate perspective is applied.
Taking these steps will help in a number of ways, but perhaps most importantly it could help prevent firms wasting valuable resources on resolving things like linkage issues with counterparties. Having the control and transparency over the data will help to eliminate these issues from arising in the first place.
Ultimately, every firm should ensure that their approach to data integrity includes a consistent and robust source of data. However, this congruous approach to data needs to extend beyond the source and take into account the way the data is sourced, tracked, used, and delivered. If you want to inherit the opportunity to view your data in a truly comprehensive way, it’s important to move away from the complexity of legacy technology that leaves your data trapped – that way you can ensure you create an appropriate foundation for true data integrity.
