Turbulent market conditions and increased regulatory pressure has resulted in a growing number of firms prioritizing counterparty initiatives, and many consumers expect to have improved systems and processes next year. Thirty-one percent of data consumers say firms have devoted extra resources to counterparty data management post-Lehman, according to a poll held during a panel at Inside Reference Data's European Financial Information Summit in London in September. The current initiatives in this space are also likely to result in improvement in the near future - 17% expect significant improvement this year, and 29% next year. Still, 33% expect no significant improvement any time in the future, and few are satisfied with existing practises. Only 17% of data consumers say they would rate their internal data management practises as good. Thirty-four percent describe the existing practises as indifferent, and 28% say data management in the firm could be described as bad. Only two people in the audience said they had board-level sponsorship of counterparty data management. But panelists said the fact there are initiatives under way still proves this is an area firms do prioritize. London-based Sean Taylor, commercial head, private wealth management, Deutsche Bank, said the industry is in the midst of a critical time due to political furore and the increased focus on transparency. If the planned regulatory initiatives become law, firms are going to have to show what they hold around the world, he commented. Yet, so far, regulation does not seem to have changed the fact that data managers need to prove return on investment to get funding for counterparty data programs. Panelists said it is easy to be cynical about fines, as some are small compared with the cost of fixing the problem - particularly if reputational risk is not taken into account. London-based Naomi Clarke, independent management consultant, who is working with buy-side firms, said she is often pulled in when something has gone wrong, and firms have already recorded losses based on poor data. Firms can record several hundred thousand dollars in losses due to trade breaks, and if this occurs they tend to want to improve data management systems, she explained. But data management is seldom viewed as a strategic value in the capital markets industry. London-based Donald Roll, managing director, Europe, counterparty data system vendor Alacra, said he had attended a workshop where participants were asked to name examples of companies that use information as a strategic advantage. "They don't look to the banking industry," he said, explaining that the companies that see data as a strategic advantage as opposed to a burden include supermarket giants Wal-Mart and Tesco. To read more articles like this one, visit Inside Reference Data...
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