02 November 2023
Today’s banks face an array of formidable challenges, from navigating stringent regulatory mandates to effectively managing risks while sustaining profitability. In this context, data traceability emerges as more than just a regulatory obligation; it becomes a pivotal element capable of unlocking compliance and excellence in risk management for financial institutions, ultimately driving PnL.
As the BASEL endgame progresses and initiatives like the Standardised Approach for Counterparty Credit Risk (SA-CCR) are being implemented, companies are increasingly prioritising data quality, traceability, and automation in their efforts to manage their balance sheets. This enhanced focus is particularly directed toward counterpart and contract data, in order to help firms achieve regulatory compliance, along with providing a competitive advantage.
Data traceability encompasses the capture, storage, and analysis of data to ensure accuracy, completeness, and accessibility. In the financial sector, data traceability plays a critical role in risk management, compliance, and operational efficiency.
Counterparty relationships in the financial sector only grow in complexity over time. Most of these contracts involve numerous legal entities across and within single agreements and require the collection of thousands of data points per agreement. Another challenge we see is establishing the linkage between the data, the agreement and their entity hierarchy. Extracting data from financial contracts, especially legacy contracts, not only satisfies regulators, but also allows firms to understand and leverage the data in onboarding, operational processes, market events, risk management and pricing. Unlocking data from legacy contracts and managing business as usual (BAU) processes to capture this systemically on an ongoing basis has been an ongoing challenge for firms.
In an era where data is the lifeblood of financial institutions, establishing robust data traceability practices is no longer optional – it has become a strategic imperative.
Financial institutions that can unlock their legacy data and maintain traceability will not only meet regulatory requirements but also gain a competitive edge by leveraging data for informed decision-making, operational efficiency, and enhanced risk management. As the financial sector continues to evolve, data traceability will remain a fundamental pillar of success in an ever-changing landscape.