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EDM Council General Meeting New York City February 16, 2006 Business Case Working Group Status Report on Progress February 16, 2006 Working Group Leaders AIG - Frank Duquette Credit Suisse - John Bottega UBS - David Goldberg IBM Facilitators
New York CityFebruary 16, 2006
Status Report on Progress
February 16, 2006
From theInaugural EDM Council Meeting (June ’05) …
Collect and share experiences of data practitioners on how to elevate EDM as a business requirement, justify it in the face of other competing priorities and sustain it as an ongoing corporate initiative
1. List the type of CCP Data projects:
B. Assessment of current pain point and emerging industry drivers. What caused you to initiate EDM CCP Data projects(s)? What was broken?:
Composite view is essential. Priorities differ among firms and business functions. Challenges are not homogenous.
Key Evidence from the Interviews
From the interview – Issues and drivers….
Never the driver but always a consideration
Technological limitations/challenges of managing multiple systems
Existing infrastructure hard to reconcile
Not the critical driver – usually charged with implementation
Contract negotiation mentioned consistently as a residual benefit
Can centralized service meet or exceed the business service objectives
Data content and format normalization is high priority
More important when viewed as KYC objective.
High priority and consistent driver
Essential to meet KYC/AML objectives
High priority for product/price master files not CCP
Requirement to synchronize systems post merger is a core objective
Risk evaluation and exposure measurement is a huge driver
Inefficient use of resources needed to reconcile data
Internal client frustration with bad, missing and late data - a clear driver
Consistent data set is the number one business objective
Internal consistency and ability to share data between functions is essential
Mandatory objective and clear pathway to project funding
Consistency across lines of business and multiple master files • Reconciliation and validation processes (beyond “find and fix”) • Comparison between sources • Granularity and precision • Maintenance (particularly corporate actions) • Naming conventions and identifiers
Sparsely populated within master files • Consolidation of trade hierarchies • Naming conventions and identifiers • Methodology for linking/aligning multiple investment programs to common legal entity • Precise terminology and classification system • Structure and cross-referencing for functional applications (I.e. risk, collateral management, legal agreements, transactions, regulatory reporting) • Automated delivery and account management instructions
Hierarchies and relationships
Compliance with regulation
Proof of best execution • Price and transactions transparency • KYC/AML verification • Audit trails to justify data decisions • Reporting accuracy and deadlines • Full disclosure • Capital adequacy requirements and risk weighting
KYC requirement (due diligence) • Streamline client “on-boarding” process • Consolidate, clean and align multiple account databases • “Know your customers business” (for product innovation, up-selling, data asset leverage, new revenue streams) • Pinpoint customer support ROI • Business unit requirements alignment and cross-referencing • Evaluate coverage models (risk disclosure, investment transition strategy, reconciliation to balance sheet)
Account set-up process
Manage market/product complexity • Accurate performance benchmarking • Integrate acquisitions and mergers • Compress clearing and settlement cycles • Minimize FO/BO breaks • Promote business process automation • Reduce internal client frustration • Reduce data/system redundancy
Research and metrics needed to determine …
Evidence and implications
Options and Remediation
Top Five CCP Issues
Risk:Operational risk from interdependent markets and processes. P&L risk from bad data and convoluted trading models. Reputation risk from poor client reporting, fines and avoidable errors.
Four Implications - Summation
The issues and drivers can be grouped into four broad categories.
Significant consensus on issues and drivers. Challenge is how to reconcile short-term (no immediate crisis) orientation with long-term (building block for doing business) objectives.
In the Words of the Members …
"Keeping that interest and sense of urgency"
“Need a champion – an active and influential executive sponsor”
“Senior level Board member to manage selling business units and lobbying peers”
“Can’t be driven by individual units because there is no alignment on business agenda”
“Priorities and funding done by centralized strategic management”
“Vision came from top management “this is the way we will operate”
“Must have senior management attention for stability”
“Reference data is back on the senior management radar”
“Senior management recognized value – otherwise this project wouldn’t have moved forward”