Why Financial Services CIOs Should Help Their Companies Open Their Data Vaults

Hyong Kim and Yang Shim

Data is the fourth pillar – people, processes, and technology being the first three – for financial services companies. And data analytics, as all businesses know, can be a crucial competitive edge. Especially in uncertain environments, the most effective strategies can be the data-driven ones.

Financial services organizations manage huge volumes of data. However, this data is often not being analyzed or turned into insights – they can’t, even if they wanted to. Why? Regulatory issues and privacy concerns, undefined data utilization strategies, dominance of legacy systems, unused unstructured data, and, of course, skills shortages prevent the optimal usage of data.

CIOs can help unlock the power of data

We explore below some of the challenges, as well as some pointers on how CIOs and business leaders can work together to help financial services organizations make the most of their data:

  1. Compliance vs. profitable growth: Data and analytics initiatives face risks of serious financial and reputational damage in the event of non-compliance with regulations or violation of data privacy. While compliance and privacy are vital – and the role of the CIO in data privacy compliance is important – to focus exclusively on compliance can mean missing out on opportunities that can deliver growth.
  1. Effective, efficient, sustainable control environment: Banks need to demonstrate that the data used in key reports (e.g., for CCAR, Basel III, or Board and Management Committee reporting) is accurate. To do this, many have started programs that collect and monitor data quality. However, this presents several management challenges related to the accuracy of data and in controls over the data that is used. To address these shortcomings, a new approach must be adopted that establishes an integrated control environment by setting the scope of the data; capturing metadata in consistent formats; and reviewing and testing the metadata and the design and operating effectiveness of the controls.
  1. The hidden potential of data: Several financial services organizations do not have a firm grasp of the potential value of their data. CIOs can contribute to increase awareness of the potential of data and help build capabilities to process the data for more insightful decision making. Companies are often burning the midnight oil just to manage structured data. As a result, unstructured data from social media inputs and multimedia streams, which are important sources of insights, is often overlooked. CIOs can help create awareness on the importance of analyzing the unstructured data and help organizations with strategies to accomplish that.
  1. Legacy vs. modern: Mergers and acquisitions over the years can leave organizations with an assortment of legacy and modern IT systems that don’t communicate with each other and operate independently. Finding a fix for this “IT generation gap” will naturally be the CIO’s responsibility, which potentially can be solved by introducing more advanced technology solutions.
  1. The skills void: Perhaps the most important question of all is “do we really have the skill sets required to help us analyze the data?” The answer from many organizations would be a firm “no.” Good data analysts are hard to find. And many companies haven’t yet identified the organizational structure that is most suitable for embedding data and analytics capabilities into their processes. CIOs can help businesses identify the right skill sets and be part of deciding how to fit data analytics capabilities into the organization. This could even mean the creation of a chief data officer (CDO) role.

While CIOs are traditionally responsible for all things IT, some senior executives prefer data initiatives to be driven by business leaders rather than by the IT department. For CIOs who wish to take the lead in data analytics, and gain the trust of senior executives, demonstrating their business acumen through data insights could be an important step in that direction.

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This article was originally published by EY (Ernst & Young).

About Hyong Kim and Yang Shim

Hyong Kim is a principal within EY’s Financial Services Advisory practice and leads the Global FS Data and Analytics practice.He has over 22 years of experience in enterprise information management and analytics solutions within the financial services industry across banking, capital markets and insurance. This experience includes project and program planning and management, strategy formulation, solutions architecture development, road map creation and implementation delivery across finance, risk, compliance, operations, marketing, and sales and service functions. Yang Shim is a principal within EY’s Financial Services Office (FSO) where he leads the Data and Analytics Advisory practice for the FSO in US. Yang has over 19 years of experience in delivering engagements that span strategy to solutions implementation for a variety of financial services, global telecommunications, retail, manufacturing and Government contractor clients. This experience includes IT strategy, solution architecture development, data management, business intelligence, transformation road map development, enterprise program planning and management, and systems integration delivery.