Managing Risk and Data: Two Key Drivers in the Global Financial Industry
A study sponsored by Reuters and conducted by AIM Software and the Vienna University of Economics shows that improving data quality is considered a key issue for risk management, and that regulatory requirements, including the Basel Capital Accord (Basel II) and the Sarbanes-Oxley Act of 2002 (SOX), are driving substantial investments in IT. On a global perspective 29 percent of survey respondents currently plan to increase the degree of automation for data reference, 29 percent for corporate actions, and 24 percent for pricing data.
The "AIM Global Data Management Survey 2004" gives insight into global trends and development within the financial industry. The survey studied 1,700 banks in 63 countries and quizzed them about 11 key topics involving reference data management and risk management. Survey results show that financial institutions worldwide are making considerable efforts to deepen their data management and increase data quality. These efforts are being driven by regulatory requirements like SOX and Basel II, which will be implemented in more than 100 countries within the next several years. SOX introduced legislative changes to financial practices and corporate government regulations to better protect investors by improving the accuracy and reliability of corporate disclosures. Basel II gives banks the opportunity to reduce their economic and regulatory capital through efficient data management and reporting.
The focus of banks' efforts lies in the automation of data reference and corporate actions processing. One out of 10 institutions still employ more than 50 people for data reference management; 42 percent of survey respondents plan to purchase an off-the-shelf data management solution or to buy and adapt a solution to their own needs. Twenty-six percent of survey respondents rely on proprietary development. This represents a significantly smaller proportion than in the past.
Fifty-four percent of respondents regard workflow management as the major objective of data management. As for outsourcing, 18 percent outsource the development of a system and 14 percent outsource the data processing itself. The survey found outsourcing especially popular in North American, the Middle East, and Asia.
"The results show that companies realize the close connection between a comprehensive data management and an efficient risk management," said Martin Buchberger, head of marketing at AIM Software. "The effort that financial institutions are making to improve their data management is noticeable."
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