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UNSTRUCTURED DATA – THE THORN IN THE SIDE FOR CHIEF DATA OFFICERS

  • By Henry Umney, CEO, ClusterSeven

 

Chief Data Officer (CDO) appointments are growing in industry as organisations look to create a data-driven culture and benefit from data insights for everything from client engagement, financial performance and regulatory compliance through to risk management.

 

However, given the copious amounts of data in organisations, drawing accurate intelligence and business insight is a significant challenge for CDOs and their teams. According to HBR.org, 47% of newly created data records on average have at least one critical, work-impacting error. It’s 10x more expensive to complete a unit of work when data is flawed.

 

As well as assuring accuracy, CDOs are faced with the challenge of grasping, managing and understanding a host of unstructured data sources, very often found in Excel spreadsheets and a variety of end user computing tools. These tools, which are used for a multitude of business-critical processes and for storing key information, are largely unmonitored in a way the enterprise systems are not.

 

Henry Umney

The spreadsheet challenges for CDOs

Poor quality data presents two challenges for CDOs. Firstly, regulatory non-compliance poses a real and present danger to organisations and therefore to CDOs. With confidential and personal data residing in spreadsheet-based processes, GDPR and CCPA compliance can be significantly weakened. Spreadsheets often contain personal data and these documents are constantly being added to or amended with no record or audit of the changes. Similarly, there are numerous other regulatory regimes too such as SOX, IFRS9, SR 11-7 and more, where unstructured data is a significant threat to compliance.

 

Secondly, the other role of the CDO is to exploit their organisation’s data assets in order to derive insight and business value, ultimately to facilitate innovation. To enable this, data warehouses (or data lakes) are created to consolidate enterprise information from disparate applications and systems to facilitate reporting. However, spreadsheets and other end user computing tools typically form part of an ‘informal’ data estate, but they don’t always easily and naturally align with data warehouses – the inherently dynamic nature of spreadsheets clash with the markedly systematic disposition of data warehouses.

 

This may be because it isn’t always possible to integrate enterprise applications into the data warehouse, perhaps where there is a lack of APIs or insufficient skills. Here, organisations may use spreadsheets to consolidate and stage the data (with possibly expert judgement applied), before amalgamating the records into the data warehouse. Likewise, modellers, and other spreadsheet power users will use spreadsheets to create business critical models and processes, and which will be subject to constant change. Importing spreadsheet-based data that is constantly evolving without reconfiguration can be problematic, and even impossible.

 

Spreadsheet risk management + Excel data warehousing = taming unstructured data

CDOs and data management teams need the same level of control and visibility of the spreadsheet data, as they have of their other enterprise data sources, if they are going to extract meaningful value from of all their business data. Spreadsheet risk management – the process of scanning, identifying and monitoring mission-critical spreadsheets – combined with the systematic export, transform, and loading (ETL) of Excel-based data into a warehouse, can help CDOs overcome the challenge of unstructured data cost-effectively, and unobtrusively.

 

To enhance the accuracy of their spreadsheet environment, they can adopt a spreadsheet risk management approach to data residing in Excel-based applications. Data management teams can identify the business-critical information, to determine where it resides and how it is all linked together. This inventory of data can then be assessed and categorised based on its materiality, importance and the potential risk it poses to the business. With that knowledge, the data management team is then in a good position to track changes in the data to maintain quality and accuracy, in the spreadsheet application. This approach can assure the quality of data they need for regulatory compliance as well as effective decision making.

 

To maintain the integrity of the data warehouse and ensure that mission-critical spreadsheet-based data is smoothly integrated into the warehouse, CDOs can utilise ETL capabilities to systematically import spreadsheet-based data. This is especially important where ‘power users’, who make extensive use of spreadsheet-based business processes, and where constant changes make it difficult to import data into a warehouse. Here a spreadsheet user can utilise a dedicated spreadsheet management platform to nominate a block of cells that need to be consistently and accurately imported into the data warehouse, regardless of any changes made to a spreadsheet.

 

This approach ensures that the enterprise meets all its data governance requirements cost effectively and unobtrusively. Business critical spreadsheet applications can be managed based on the organisation’s data policies while allowing users to benefit from the unique flexibility and dynamism that Excel offers to them.

 

Spreadsheet risk management combined with data warehousing is a proven way of creating a single, accurate repository of data – regardless of the number, format and varied sources of data – for interrogation and informed decision making, governance and compliance. It is already adopted in many large organisations.

 

About the author

Henry Umney is CEO of ClusterSeven. He joined the comp any in 2006 and for over 10 years was responsible for the commercial operations of ClusterSeven, overseeing globally all Sales and Client activity as well as Partner engagements. In July 2017, he was appointed CEO and is strongly positioned to take the business forward. He brings over 20 years’ experience and expertise from the financial service and technology sectors. Prior to ClusterSeven, he held the position of Sales Director in Microgen, London and various sales management positions in AFA Systems and ICAP, both in the UK and Asia.

 

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Business

CAPITAL MARKETS – LIQUIDITY MANAGEMENT DURING COVID-19

COVID-19

Tony Farnfield, Partner at management and technology consultancy, BearingPoint

 

When “Dr. Doom” predicted the 2008 financial crisis back in 2006, and spoke of a necessitated market correction and was calling for the repricing of riskier assets; predicting a continuation of a global financial slowdown, or even a global recession starting in 2020, this prediction was based on known factors affecting the global economy. The unforeseen outbreak of Covid-19 and the increased volatility this has brought to global financial markets was not taken into account.

Three months on from the initial outbreak, and we have already witnessed the biggest intraday drop in the Dow Jones Industrial Average. The outbreak, coupled with the oil price shock, triggered responses from the Federal Reserve, the Bank of England and Central Bank of Canada to cut benchmarks rates in an effort to even out the shock to the wider economies.

There is a high degree of uncertainty on how the coronavirus crisis will unfold. We could experience only a temporary disruption – lasting from a few weeks to a few months, or a prolonged stress in markets, assuming that it will be months until vaccine clinical trials begin and with rate cuts (already reaching bottom) having limited effects on the required stimulus.

Banks have undeniably improved their liquidity following regulatory guidance post financial crisis; however, treasury departments will need to prepare and caveat for a wide range of possible outcomes. Traditional stress testing, scenario development and re-calibration have not taken into account conditions such as the ones experienced with the Covid-19 outbreak or the speed with which things evolved.

At a generic level, there are three key steps Treasurer’s should look to take:

 

  1. Convert uncertainties into emerging and quantifiable risks

This is already being considered by some of the larger financial institutions under their crisis management responses. However, it’s important to highlight that even for those that have triggered the crisis management process, the forecasting, rebalancing and risk assessment should be continuous, taking into account new developments in the following manner:

Continuous forecasting

Continuously monitor and develop scenarios of potential sources that could disrupt funding and liquidity usage. With the right analytical capability, cash-flow projections should adapt to changing scenarios, including scenarios coming from the different business lines. Scenario sources could include unexpected credit usage that could encourage either large prepayments or defaults, or changing corporate customer behaviour – deposit inflows from corporates and depositors affecting leverage-constrained institutions. Also, there should be some consideration given to the availability of funding sources or, for wholesale funding, acceleration or reduction of funding plans.

Continuous re-balancing

Take immediate actions in increasing liquidity and cash holdings in the short term to cover for the uncertainty.

Continuous risk assessment

Account for emerging risks previously not accounted for, such as the temporary closure of operations or reduced capacity of market utilities. Assess those scenarios and how these are captured and factored in stress tests. Intraday liquidity should be the primary focus to understand immediate cash requirements.

 

  1. Refine your liquidity risk measurement

Better identification, measurement and analysis of key liquidity drivers should become core for an institution’s ability to effectively manage and mitigate particularly unique risks not previously considered. To do this, Treasurers should consider the frequency of their monitoring, and increase levels to daily stress tests and daily Early Warning Indicator testing to include daily developments.

In-depth analysis of risks

Re-run your liquidity risk identification exercise to understand better your current exposures, especially examining certain instances of this outbreak crisis, e.g. oil-related exposures, airline, marine or supply chain related exposures etc.

Re-calibrate based on new understanding

Re-assess existing scenarios or add new scenarios in covering a range of events and timeframes (e.g. sustained spread of the virus over x months vs limited spread and containment). Revisit your Early Warning Indicators to monitor emerging risks. At a later point, revisit these to assess if market signals existed and if they were picked up by your indicators.

 

  1. Review your mitigation plan

Identification, assessment and measurement is only part of the overall response. Stresses or risks that can be crystallised need to be accompanied by mitigative actions, agile and feasible enough under the current market conditions. Contingency funding actions might need to be revisited to determine if additional actions need to be considered.

Revisit and verify the availability of near real time reports, such as positions of securities holdings reports. Such information should be readily available and synthesised in the event that you will need to communicate clear and concise plans to investors, regulators or other market participants in relation to liquidity management strategies to foster confidence in the market.

In summary, reviewing and preserving an institution’s liquidity under extreme and volatile circumstances is the core responsibility of any treasurer. However, we know that any scenario or contingency planning is unlikely to be fully predictive of unprecedented scenarios such as this. Re-visiting already set practices and testing their efficacy and completeness should be the first step before considering inserting new scenarios and new actions into the mix. Nothing tried and tested can always remain true.

 

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Business

STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19

COVID-19

By Alex Balcombe, Partner at Harris Balcombe

 

The last few weeks has seen businesses in hospitality, tourism, retail, leisure and more forced to close their doors following the Government’s orders that they should close to prevent the spread of coronavirus.

While this is expected to flatten the curve and reduce the number of coronavirus cases, it will of course have an impact on businesses and employees alike.  For small businesses especially, there are many concerns about how they can claim on their insurance to weigh the fall of this impact.

 

Mixed Messaging

In response to calls to help struggling businesses, the Government has informed the public that companies who are facing turmoil will be able to claim on their business interruption insurance during this difficult time. For most, this is wrong.

Alex Balcombe

The insurance industry has also been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period. This isn’t strictly true either.

How can businesses see through the mixed messaging and best secure their future and their livelihoods and reduce money worries? It’s an extremely stressful time for many companies, and confusion over whether or not they can be covered can only cause more unnecessary stress.

Since it’s a new disease, most businesses will not be covered for business interruption due to COVID-19. In fact, the vast majority of policies do not cover anything related to COVID-19.

That said –  don’t rule out the idea that you may be covered. There is a chance that you will be covered against COVID-19, but not know it. This is a very small chance, but your current cover may already protect your business against the consequences of coronavirus, and the nationwide response to it –  though those with this cover are unlikely to realise it.

 

How Could I Be Covered?

Not everyone has business interruption insurance, as it’s not a legal requirement. It is entirely up to the policy holder to weigh up the benefits of having it, and their ability to trade should a disaster happen.

To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:

Infectious Disease Extension 

Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. As it is a new disease, these policies will not have included COVID-19.

Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.

However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.

 

Denial of Access Extension (non-damage)

Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property. This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.

If covered by this clause, there are often very subtle differences in wording in your policy. This could depend on the insurer or policy. You may well be covered, but it will depend on your particular circumstances, and the specific policy wording.

 

What now?

It’s clear that the Government needs to do more in ensuring there is clear messaging for businesses, and to help the insurance market look after policy holders. This is an unprecedented situation, and with many people looking to claim on their insurance, we’re already seeing major delays which could have a domino impact.

People throughout the world are understandably facing all kinds of worries because of the current pandemic. Our ways of living have changed, and many business owners will not have experienced a situation like this in their life times. If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.

These claims are not simple, but loss assessors will be experts in business interruption insurance, and will specialise in large and complex claims. They will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.

 

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