Recent research conducted by Aite Group highlighted the link between poor data quality and regulatory penalties, further creating a case for financial services organisations to improve their data quality. Poor data quality can lead to an adverse conclusion by regulators about a bank’s ability to accurately monitor business risks.
Therefore, ongoing focus on data quality is required in order to maintain and improve, for example, credit risk profiles and the infrastructure to deliver them to users.
According to the Aite report, ‘Data: The Tail That Wags the Stress Test’, data plays a critical role in the complex process of stress testing. Banks must analyse a tremendous volume of disparate, multisource data in order to calculate a risk profile and create projection models. Banks that cannot attest to the accuracy or consistency of their data are in jeopardy of incurring compliance penalties. It is therefore vital for these organisations to ensure their data is ‘clean’, allowing for stress tests to run as smoothly as possible, assisting to greatly lower their risk profile.
To manage the process, banks are working with data quality vendors such as Trillium Software to significantly improve their data management capabilities and incorporate the automation of data to eliminate human error and ensure this data is accurate. Appropriately applied technology helps companies overcome these challenges by providing a visually-rich, user-friendly, self-service platform that enables risk and compliance teams to access, validate, analyse and monitor the data needed for stress testing with minimal involvement from IT or operations groups.
“Banks, such as Absa Capital, that invest in quality data, reduce their credit risk and are also rewarded by having to hold less capital. This capital can then be invested to boost profits,” says Gary Allemann, MD at Master Data Management.
For stress testing mandates such as CCAR, banks can utilise Trillium’s solution to:
· Improve responsiveness to tight regulatory deadlines and constant changes with minimal involvement from IT by providing self service capabilities for data control, accuracy and insight;
· Enhance regulators’ opinions of stress tests by assuring that accurate and complete data is at the core of risk monitoring capabilities and stress test scenarios;
· Increase productivity by minimising the time spent addressing data disruptions and fixing defects.
“Stress testing is already a complex and arduous process. The presence of poor data quality can exacerbate even minor data issues and significantly hinder a bank’s ability to present regulators with accurate information,” says David O’Connell, senior analyst for Aite Group.
“By leveraging self-service data assurance solutions from companies such as Trillium, banks can have more credibility with regulators, maximise the automation among the many processes within a stress test to achieve significant productivity improvements, and be better at identifying and assessing risks in their business models and devising contingency plans.”
As a leading provider of self-service data assurance solutions that blend industry leading technology, deep subject matter expertise and business-relevant content, Trillium enables business leaders at banks and other financial institutions to identify critical data defects in risk and compliance processes, quantify their impact, and establish business as usual processes to manage their data.
Join the Global Association of Risk Professionals (GARP) for a January 28 webinar on this important topic. Click here to register.