Article
Risk data aggregation: Getting ‘good data’ requires a new conversation

JWG analysis.

Without a consolidated viewpoint on what new risk data requirements mean, firms will be at a loss when it comes to determining best practice.

We are in the middle of a massive, global industry transformation with many rulebooks. With divergent regulatory timelines, standards and existing data architectures a common and holistic ‘best practice’ target operating model will be difficult to achieve.

The deadline for firms to upgrade their risk data aggregation capabilities is fast approaching. The Basel Committee for Banking Supervision’s Principles for Risk Data Aggregation and Risk Reporting are due to be implemented at the start of 2016, but research shows that the industry is well behind schedule.

What is needed is a consensus industry view on what ‘good’ looks like in order for firms to determine their own roadmap to implementation.

Key questions that need to be answered include:

1. What is the scope of application within your firm, and what will the impact area look like?
2. What level of data quality should be targeted?
3. What new standards, metadata and linkages will have to be implemented to meet the firm’s target operating model and to ensure compliance?
4. What infrastructure and controls are required, and how can they be judged to be effective?
5. What does good governance and controls look like?

Uniting regulators’ and firms’ views of ‘what good risk data looks like’ is challenging – especially given the current state. The issue is that, to talk ‘data’, it must be put in context across many different business drivers, functions and regulatory requirements. To do this a joined up perspective is required across metrics, standards, models, benchmarks and implementation approaches.

Unfortunately, despite the impending deadlines, the industry is still struggling to connect the dots. Some of the key takeaways from our talk this week:

• Uncertainty over where standards would come from, and how they would differ between national regulators, and the role of the industry in defining them
• Likelihood of domestic SIBs being brought under the mandate in future
• How firms were approaching the data dictionary
• Whether anybody was planning on sharing their approaches to the principles with the industry
• Getting senior management buy-in across regulation work streams to implement the principles now rather than as a single project
• The difference in treating the BCBS implementation as a ‘data’ project as opposed to ‘risk data‘.

See below for the JWG presentation presented at Marcus Evans conference “Risk Data Reporting, Aggregation and Management” on 29 April 2014.