Data governance is the roadmap that guides asset managers towards unlocking the full potential of their firm’s assets. By harnessing the power of data governance, asset managers can confidently ensure compliance, fortify security, and enhance data quality throughout their organization.
Data is the backbone of success for all asset managers. Those who lack data governance policies are at a high risk of facing data breaches, privacy violations, and misuse, each risk capable of deteriorating a firm. Beyond immediate repercussions, longer-term risks can damage the firm’s reputation and can lead to a potential loss of investors. The need for having an effective data governance framework is not merely a choice, but rather an indispensable strategy. Data governance empowers asset managers to uphold data quality, navigate risk threats, and exceed regulatory requirements, all necessary for a robust organization in today’s market.
Data Governance Overview
At its core, data governance is the systematic approach to managing data assets within an organization. The structured framework encompasses policies, processes, and controls to ensure data issues are accurately defined, resolved, and audited to meet the firm’s overall strategy and business goals. By establishing clear lines of data ownership, defining meticulous standards, and rigorously upholding data integrity, data becomes a pathway for organizational growth. In data-dependent industries such as asset management, a robust data governance strategy is not merely an option, but rather a fundamental necessity.
Data governance in asset management firms promotes cross-departmental collaboration, ensuring that data is coordinated and consistent and that all parties are aligned on data understandings and goals. Data within the organization becomes easily accessible and increases accountability, productivity, and trust within the organization. Firms that focus on having a robust data governance framework can better leverage their firm data as an asset, enabling them to improve decision-making and gain a competitive advantage.
Data Governance Amongst Asset Managers
Data governance amongst asset managers is vital due to the complex nature of their business operations, stemming across the trading, operations, IT, compliance, risk, and other firm departments. In the United States, data quality issues cost $3.1 trillion per year across the board (Webinar Care). Furthermore, low data quality and availability can cause employees to spend 36% of their time on non-value-added tasks in Finance (McKinsey & Company). 55% of asset managers have already recognized the benefits of data governance and have taken initiatives to enhance data governance and quality within their organizations (Accenture). Having a dedicated data governance team not only increases data quality but also increases data confidence by 42%. (Webinar Care)
It is crucial for asset managers to recognize the benefits of data governance and focus on it. A lack of focus is costing firms money and decreasing their employees’ productivity. In an industry where it is imperative that each resource is provided with the tools they need in an effective manner, the lack of data governance policies limits this. Not only does a lack of data governance hurt an asset management firm internally, but it also negates its ability to compete within the market. Front-office investment analysis slows down, middle, and back offices face operational delays, and investor data becomes vulnerable. This cannot only have an impact on the firm’s rate of return, but it can also lead to increased regulatory risk and a loss in investor trust.
High-Level Data Governance Framework
Implementing a data governance framework as an asset manager can seem daunting at first; however, following a well-structured and adaptable general framework can make the process seamless and effective. FinServ’s general framework incorporates key learning from previous clients and ensures a comprehensive approach to kick-starting the data governance initiative.
| Phase | Description |
| Assess | During the assessment phase; the firm must review its current policies, processes, and objectives to ensure the proper implementation of the data governance framework. To do this, thorough interviews must be conducted with all key business functions, and all firm documentation must be reviewed to evaluate the state of each business group. As a result, documentation must be produced to gather reporting requirements, pain points, and current business processes. This assessment serves as the critical foundation to resolve a firm’s data governance issues. |
| Inventory | The firm must then create a comprehensive data dictionary to serve as the central repository for all data requirements. Key data elements must be documented, such as the data type, description, source of origin, and other key details. Data lineage must also occur in this step to record the origin, flow, and transformation of the data from initiation to destination. All other relevant business and data process flow diagrams must be created in this phase to ensure a proper understanding of current data flows and definitions. |
| Control | The firm must address all data issues in this step. It is important to review all the current data issues within the firm and establish the necessary controls to ensure data issues are controlled in a systematic and efficient manner. To help facilitate this, support must be obtained from key stakeholders to guarantee the proper execution of control measures and risk mitigation. All data controls will depend on the type of data, current policies in place, and the expected goals for the firm. Data control is a pivotal step in resolving data issues within a firm. |
| Report | Once data issues have been controlled, all key business functions will be responsible for providing finished reports, dashboards, and analytics to the firm. These reports will describe in detail the issues the firm faced, the measures that were taken to control those issues, and the current state of the data. Feedback must be gathered firm-wide, as that will serve as the new basis for evaluating data issues. Once the firm has reviewed the current reports, the process must start again to ensure data governance measures are up to date and issues are mitigated as soon as possible across the firm. |
Conclusion & Suggested Next Steps
Successfully implementing a data governance framework can be challenging for many alternative asset management firms, as there is a need for an objective framework and subject matter expertise. Recognizing, documenting, and strategically resolving key data issues are critical to a firm’s success. Not only does this increase the operational efficiencies within the firm, but it also provides the firm with a competitive advantage. Asset managers can engage with subject matter experts to gather insights into implementing a data governance framework properly, but they must still have the know-how to ensure proper implementation for their firm.
FinServ has experience researching, developing, and working with clients on their custom-driven data governance requirements. We have extensive knowledge of the different data types, workflows, and processes that exist among leading asset management firms. Our methodologies and frameworks allow us to provide objective and high-quality solutions for our client’s data governance issues. Our technical skillsets and comprehensive project management model ensure the proper resolution of data governance issues. FinServ can help kick-start, support, or lead your unique firm through its complex data governance projects.
To learn more about how we can help and our services, contact info@finservconsulting.com or (646) 603-3799.
About FinServ Consulting
FinServ Consulting is an independent, experienced provider of business consulting, systems development, and integration services to alternative asset managers, global banks, and industry service providers. Founded in 2005, FinServ delivers customized world-class business and IT consulting services for the front, middle, and back-office. FinServ provides managers with optimal and first-class operating environments to support all investment styles and future asset growth. The FinServ team brings a wealth of experience working with the world’s largest and most complex asset management firms and global banks.
