Chief Data Officer: A Role Under Construction

Data is hot: As the world contemplates the fallout from the Edward Snowden scandal-Snowden, a National Security Agency (NSA) IT contractor, leaked details of the NSA's surveillance and data-collection program-individuals, companies and even countries have been confronted with issues surrounding the sensitivity and power of data. It has taken some time for the financial services industry to accept the importance of having a sound data management strategy, but now firms seem to have realized that sitting on data silos is a waste of money and time, and poses operational and reputational risks.

It was back in 2006 that the industry's first high-profile chief data officer (CDO), John Bottega, was appointed to head up Citi's data strategy, and yet, the role seems still to be in its infancy. Since then, a few "data czar" roles have been expressly created across the capital markets or simply dislocated from the IT team, mostly within large firms, and mostly on the sell side. But the reason why CDO and head of data management roles are coming into existence is that there are non-technical business decisions that need to be made regarding data governance.

"Firms are now realizing that data is an asset," says Daniel Simpson, managing director and head of Markit EDM at Markit in London. "Regulations have forced them to maybe get to the point quicker than they would have otherwise, but firms have to demonstrate to the regulators that they are compliant."

All banks are under great operational cost pressure and have to become much more data-driven in order to comply with their significant regulatory obligations. "As firms are becoming more technology-driven, we will see a rise of executives with a technology background, and the role of data is going to expand and become critical," says Neil Palmer, partner with SunGard Consulting Services' advanced technology business.

Regulation Times
Financial institutions need to present clear evidence to the regulators that they are in control of the data they receive and consume. Having someone outside IT responsible for developing, driving and implementing an enterprise-wide, unified data strategy, could be the next big move, if it has not been done yet.

“The bank came to realize its information system contained a great deal of data, and if they wanted to have an accurate overview of the bank, they needed to control the data language.” Marie-Laure D’Estaintot, Société Générale

Marie-Laure D'Estaintot, Société Générale's (SocGen's) CDO, based in Paris, was appointed last January to head up the data team established by the bank some three years ago. "The bank came to realize its information system contained a great deal of data, and if they wanted to have an accurate overview of the bank, they needed to control the data language," she says.

D'Estaintot describes her work as establishing a link between the data residing within ScoGen's myriad systems and the people using that data on a day-to-day basis. "It's all about pooling the resources and sharing the same data; it's the future of the information systems-we need to break down silos," she says. By road-mapping the whole data infrastructure to allow different part of the business to access and use good quality data, the CDO is feeding each part of the business, from risk management to human resources, with an accurate and high-quality database.

Under Construction
Although CDOs are gradually growing their ranks, there is still a lot of benchmarking and assessment going on in terms of nailing down exactly what the role encompasses and what it aims to achieve. Along with the new title come new responsibilities and new missions, according to SocGen's D'Estaintot. "We are still in the process of formalizing the new job title," she says. "We are learning as we go, and we are building new tools and new methodologies. We are also training the people who need to work with the data. But it will never be absolutely finished-it is a very lengthy process."

As explained by Waters' US editor Anthony Malakian in his April 2013 column, the appointment of a chief data officer is not a trend that is likely to catch on soon across the buy side, a sentiment shared by Investit's John Robertshaw. "On the buy side, except for the very largest firms, the role of chief data officer is largely aspirational," Robertshaw says. "As long as the responsibilities of this role are understood and are actively being discharged within the firm, then the need for this C-level appointment is premature."

According to Robertshaw, the profile of this role will become more prominent as organizations grow and the conversion of data into knowledge to influence firms' strategies and operations becomes critical.

A Unified System
Reorganizing the data infrastructure from the bottom up and making sure there are data stewards in place responsible for managing every aspect of it is one of the major tasks a CDO is responsible for. "Knowing where the data originated, who has ownership of it, who is entitled to use it, and how they are using it, sound like obvious questions, but they are very hard to answer for a lot of organizations. This is why data management is really a supply chain problem," says John Randles, CEO of Bloomberg PolarLake, the data giant's enterprise data management business.

At SocGen, having a unified language was one of the bank's top priorities, according to D'Estaintot. "We started working on behalf of the financial and risk departments as well as human resources," she says. "Those are the departments working across all the lines of the business so they need to be able to access clean and unified data. The CFO and the CRO absolutely need an enterprise-wide frame of reference."

When D'Estaintot talks about unifying language and converging views, she knows what she is talking about. For example, whereas French speakers might refer to the business as Société Générale, English speakers tend to shorten it to SocGen, and, depending on the client, an asset or security can be referred to differently and will fall into two separate data sets if there is no rule to link them together, something IT cannot do on its own, she adds. "The Société Générale Group is made up of about 1,400 different legal entities. If you want to have good quality data in your system to show to the regulators, you need people at the C-Level to manage that from the top."

In addition to simplifying day-to-day preparations for financial services firms, a unified language also helps to expedite integration processes when merging two different data architectures, especially in the wake of a merger or acquisition.

Challenges
The first battle an incumbent CDO needs to win is to be seen as a data advocate in the eyes of senior executives and defend the fact that their firm needs data professionals, and that means someone outside of IT. "The first challenge was to make people realize it is a profession and not an IT problem. It is also an IT problem, but it is above all a data management issue that has to be addressed by data professionals. IT can't do it on its own," D'Estaintot says. It is crucial that heads of data operations are accepted as data professionals and receive the support of their CEOs, she adds.

"Data is important to regulation, to risk management, and to day-to-day operations. CDOs are coming to the fore, not just from the perspective of helping senior management teams to manage resourcing better, but also to act as an internal advocate for the concept of data management," adds Bloomberg PolarLake's Randles. A lot of CDOs are still reporting to CTOs and CIOs and don't have the adequate remit to implement a real data strategy.

Looking ahead, the next step for a CDO is often to upgrade the application and technical architecture of the firm's information systems. "Typically, IT systems are usually built piece-by-piece and we realized we needed a unified and centralized system to be able to share the same data across the entire organization," D'Estaintot says.

Across Business Lines
Apart from delivering clean and accurate data to the regulators, a good data strategy can be beneficial for the business in many ways, as risk managers are always looking for more quality in the data they use. "Immediately after the financial crisis, firms invested a lot in risk management systems before realizing that even good systems fed by bad data are still bad risk management processes," Randles says. "If you can control your supply chain and know where your data comes from before it goes into your risk management system, you can start fixing and controlling data quality very quickly."

At a time when financial services firms are being forced to do more with less, good quality data can also help drive business benefits and reduce expenses. "If you take advantage of the project you are implementing, even if there is a regulatory reason for doing it right now, you should make the most out of it for your company's sake," says Steve Engdahl, senior vice president of product strategy at GoldenSource. But above all, having bad-quality data in your system can become costly and time-consuming.
Even if data projects can be difficult to implement and to fund, results in the longer term could be quite significant. "The financial industry is trying to understand how it can operate a ‘smart company' with the ability to turn data into knowledge so that they can then influence the buying trends of their client base," says Robertshaw.

CDOs can help turn their organizations into the smart businesses to which Robertshaw refers, making the most out of the data they produce to influence business trends and reduce the cost of having to incessantly fix bad data. "CDOs are able to deliver a picture to show where the company comes from, where it is going, and how the regulatory impacts are going to hit it, but also, to present a vision around what data can do across the entire organization," says SunGard's Palmer.

If sound data management practices under the leadership of a CDO can help firms recover the time wasted correcting data and fixing it at its source, and the money lost by poor business decisions based on inaccurate data, then the creation of a CDO role would seem a logical move for all but the smallest and simplest financial services firms.
In this regard, SocGen's D'Estaintot is clear: "Data only has value when you know what you will be using it for and why."

Salient Points

• Although the role of the chief data officer is still mostly aspirational, it will become a critical and inevitable position within financial services firms as they become more data driven.

• Unifying the data infrastructure is a task for data professionals to handle-firms' IT teams cannot undertake those projects on their own.

• Good data can help firms by reducing the costs of running on poor-quality data, avoiding mistakes and inaccurate business decisions, as well as meeting regulatory obligations.