The Increasing Importance of Enterprise Data Management
Risk management is – and has always been – a core capability of DTCC. But in the decade since the financial crisis, it has emerged at the forefront of what we do. It will play an even larger role in the future, as we face greater interconnectedness in our financial markets, new fintech innovations and the ever-present threat of cyber risk, the No. 1 issue keeping us all up at night. Innovative areas of risk management depend on a foundation of high quality data, with strong governance, housed and accessed via an advanced data architecture. Without that firm foundation, the benefits of new technologies, including advanced data analytics, machine learning and AI, will remain out of reach.
This is why Enterprise Data Management (EDM) has become mission critical at DTCC, as part of our overall approach to risk management, which is the bedrock of our firm. At the recent ANNA Meets the Market conference in New York, I described how the financial crisis changed the game for financial market infrastructures (FMIs), bringing into clearer focus the importance of resilience in the face of crisis and change.
While FMIs dealt very well with the stresses of the crisis, including the insolvencies of some members, most famously Lehman Brothers, regulators around the world nevertheless started to ask what might have happened if the crisis played out differently and multiple large players were allowed to fail at the same time.
In short, how resilient would the FMIs have been under those very different circumstances? The public sector determined that they may not have been as resilient.
When you study the regulations and principles adopted in recent years in response to the crisis, they read like a call to arms. For Global Systemically Important Banks, the BCBS 239 Principles aim to raise their demonstrated capability to aggregate their risk exposures very quickly, especially during the highest market stress episodes. For FMIs especially systemically important ones, the CPMI-IOSCO Principles demand more resilience than ever before, under much more extreme scenarios than those we prepared for in the past.
With those sets of Principles as reference points, DTCC has implemented a formal, multi-year EDM Program focused on data quality transparency at source for critical data elements used in aggregating risk exposures for our three Systemically Important FMIs, as part of a multi-dimensional increase in all our risk management capabilities. In short, our work is about having clear evidence of the quality and transparency of our data, and a clear path to remediating any data quality issues, which in turn has a direct impact on increasing our overall resilience to detect and recover from disruptions as efficiently as possible.
Increasing resiliency requires carefully assessing all the traditional major risk families as well as the potential risks presented by our highly interconnected financial markets, evolving fintech technologies and the heightened cyber risk environment.
