Although most financial services firms have long had a Chief Data Officer (CDO), it’s only recently that these individuals have begun to focus on more than policies, standards and governance ꟷ the philosophical side of data in other words. They often didn’t have enough power, budget, or control over the anatomy and technology of the firm ꟷ that is now changing.
What are the drivers for this new, more central CDO role? It’s really a combination of enlightenment and desperation. On the desperation front, many firms, looking at issues in the finance, risk, regulatory and financial crime spaces, are finding it’s just too costly to use traditional approaches. Hiring hundreds or thousands of extra compliance, control and reporting staff is prohibitively expensive. Instead, they’re being forced by cost dynamics to go back to a simpler data-centric approach to address their problems.
There’s also some desperation driven by regulatory scrutiny. Two particular catalysts are the Basel Committee of Banking Supervision (BCBS) 239 and the General Data Protection Regulation (GDPR). Both are interesting because, unlike surface-level regulation (‘send me another report’), these regulations delve deep into the structure of the bank and directly demand a modern, robust and well-controlled data architecture.
On the enlightenment side, the good data aspiration has been around for a long time. And technology has finally caught up. Across cloud, big data, open source infrastructure and analytics, and fintech/regtech (financial technology/regulatory technology), developments have moved so far and so fast that firms can at last go back and do the ‘data thing’ right. This should allow a shift of focus for people in finance, risk, financial crime and compliance away from scavenging, reconciling and cleansing data to tasks and roles based on insight, judgement and advice.
These carrots and sticks are helping CDOs boost their organisational power and influence. In my experience, firms are moving at different paces. There have been some notable false starts, sometimes where technology evangelists have proposed a grand vision that traditionalists have resisted as naive ‘magic wands.’ Others have tried to move forward in a innovative way, but have struggled to deliver real solutions as they have hit organisational and legacy complexity issues. Some data lakes have become swamps and sewers.
The CDO should convey a grand data-centric vision to the business ꟷ data really is at the core of so many issues and opportunities. While painting that vision is essential, the CDO also needs to be pragmatic. After all, in today’s constrained climate no board has the appetite for monolithic, expensive, data programmes where the benefits only arrive at the end of the journey.
So CDOs need to be ready, early on, to work with others on the Executive Committee (ExCo)ꟷbusiness heads, marketing, the Chief Risk Officer (CRO), Chief Financial Officer (CFO), financial/ cybercrime teams and others ꟷ understand their specific pressure points and challenges, and then work in partnership to fix them.
The CDO can take a strong position in driving GDPR and BCBS 239 solutions, but can also help others on the ExCo with innovative data-centric technology and approaches to solve specific growth, enhancement, cost reduction and control/regulation challenges.
This could mean, for example, helping the CRO, Money Laundering Reporting Officer (MLRO) and Chief Information Security Officer (CISO) by providing trusted data, analytical tools and perhaps even machine-learning capabilities to deliver better, faster, cheaper financial crime and cyber-risk prevention. Or it might mean helping the CFO by providing the analytical tools and talent to help Finance improve its planning and forecasting cycle and streamline procurement spend.
All these actions are great ammunition for CDOs. It’s all very well to have enlightened arguments about data-centric, insight-driven organisations. The ExCo may nod and smile and go back to their day jobs. But if the CDO can show how, month to month and quarter to quarter, a data-centric approach really delivers the desired results, momentum and trust can only grow.
That’s why we’re seeing the role of CDOs’ start to shift. We’re seeing them take on more senior reporting lines within the organisation, being involved with the ExCo in a way they weren’t before and, critically, acquiring greater influence, and expectations from members of the ExCo.
If CDOs are skilful in their interactions with the ExCo, they’ll be well placed to tell, then deliver the story of a data-centric organisation, powered by insight and analytics. The end state is where the industry, as a whole, operates with clean, consistent, ubiquitous but well-controlled data ꟷ fostering a deeper understanding of how financial services can add value to the world. That’s good news for everyone ꟷ banks, insurers, customers and regulators.