Data Management: How to Use Your Company’s Biggest Asset to Reduce Risk and Drive Business Results
Customer and Vendor data is the lifeblood of your business. It’s a company’s greatest asset — but can often be its greatest weakness. From identifying new sales opportunities to assessing the overall risk exposures within business – the opportunities are endless, and artificial intelligence is pushing the possibilities even further.
However, it’s impossible to make confident business decisions, or capitalize on new and improving technology, if you don’t start with clean and accurate information. And that’s where too many organizations find themselves today: with disconnected, legacy technology systems, siloed data across the organization, and out-of-date customer and business information.
If you start with inaccurate and out-of-date information, all decisions made with it will be impacted. We’ve all heard the saying “garbage in, garbage out.” When it comes to data management, it’s never been more true than today.
The Trouble with Master Data
It’s clear how critical data drives core business functions across an organization. Yet far too many enterprises still rely on outdated and incomplete information to run their business. There are several reasons data management remains so troublesome.
It starts at the initial point of entry
One of the biggest challenges is ensuring you have a single, accurate view of the information at the initial point of entry. It’s here where information comes in as incorrect, incomplete, or duplicates are created. In the case of risk management, if you don’t have an accurate view of all of your risks at the point of entry, each risk decision made off of this input may compound upon itself.
Governance, data management standards and best practices, used on a regular, systematic basis, can and will improve accuracy. Yet even then, human error is unavoidable – and the pace of change makes it nearly impossible to manually keep this information up to date.
Next comes the problem of merging multiple data sources
More often than not, you are not working off of a single source of all information or a single database. Rather, information comes in through a variety of sources – whether it is internal databases or external data sets. Take, for example, financial reference data which comes in from a variety of data feeds leveraging unique naming conventions and acronyms. When this information comes into one central hub or linked to other information within the business to make decisions, it’s critical to ensure the integration and merge is done in a way that prevents duplicate views so that you can make the most informed decision.
Data changes and decays rapidly
Within one year, business data can decay by 20% or more depending on the type of information you’re collecting. No matter how much effort you put into ensuring clean and accurate information, the data you use will quickly be out of date.
Data decays rapidly for many reasons. Job changes, office moves, new websites, new branding. Stock price movements, credit fluctuations, new security issues. Add mergers and acquisitions to the mix, with new ownership structures, and preventing data decay becomes a daunting task.
If you’re not keeping up with the changes, data quality continually depreciates.
Data is diffuse, in multiple systems and complex
Organizations deal with an enormous amount of information every day. Often, this information is stored in multiple systems and databases across an organization, each with its own unique numbering and classification system. When companies are acquired, typically legacy systems remain – and the sheer number of business systems is multiplied.
Without a single, master database, information quickly becomes out of sync. This overlap is inefficient, and means different departments rely on varied levels of data quality to complete their work.
How can you know which data record is accurate when you have multiple conflicting records to choose from? Storing customer or vendor data in different systems makes keeping all your records aligned, and knowing which one is the most current, a real challenge.
Why Data Management is So Important Today
The more accurate, complete, and timely information you have, the more likely you are to make better business decisions, manage risk and stay competitive in an ever-changing market.
Meeting Regulatory Requirements
As our world relies more and more on data, regulators are stepping up to protect consumers and end-users from misuse. Good practices in data management are essential to abide by these regulations and ensure compliance.
Top-of-mind for most companies is the upcoming General Data Protection Regulation (GDPR), taking effect May 25, 2018. It’s a significant overhaul of data protection laws that affects all companies that process the personal information of EU citizens.
GDPR introduces new requirements around reporting and documenting data processing activities. You need to truly understand what information you are collecting, where your data resides (both inside and outside your four walls), and ensure you are not only protecting the information but also can remove it if asked.
Knowing who you are doing business with – both your customers and third parties – is critical to complying with both anti-bribery and corruption and anti-money laundering regulations. Regulatory requirements specifically call out the need to take a risk based approach towards verifying (and monitoring) who you are doing business with (and what business you are doing with them) to ensure you are not doing business with someone that may be performing illegal activities on behalf of or through your organization.
Having a complete picture of all of your holdings and transactions is critical for financial institutions to have the appropriate capital reserves and reporting to comply with Basel II and Basel III and meet compliance requirements for reporting, transparency and risk reduction under MiFID II.
Improving Sales and Marketing Results
Having inaccurate and incomplete information on your customers or prospects can lead to missed opportunities. For example, you may miss a key demographic to target if you do not understand who your customers truly are.
Without accurate demographics, such as numbers of customers, correct sales, geographic, and revenue figures, for example, you may target prospects that are too large or too small for your business. You may mis-direct valuable marketing and lead generation resources. You may feed demand generation and other analytical models with incorrect or misleading data, targeting customer programs incorrectly and generating flawed insights – giving competitors an edge – and providing them the opportunity to lure customers and prospects away from you.
On the most basic level, your programs may not even reach the right customers. Is Joseph Bank a business or a person? Marketing ROI starts with real, useful, correct business data.
Managing Supplier and Third Party Risk
Third parties are a growing source of risk as today’s businesses outsource more of their core activities. Information security is one risk that has become a major concern, with 56% of companies experiencing a third-party data breach in 2017.
Other third-party risks companies need to address include bribery and corruption, regulatory compliance, supply chain disruptions, financial viability, performance management and more. Managing these risks effectively requires third party data you can trust.
Third-party risk management starts at onboarding, where companies collect information about their third parties to evaluate any risk they may introduce to the relationship. Inaccurate, out-of-date or poor-quality data inhibits a company’s ability to analyze and address third party risk.
A third-party failure to manage risks can result in fines, directly affect the bottom line, cause drops in stock price, disrupt operations and tarnish a company’s reputation. Companies need to have accurate and regularly updated information on their third parties to protect their business.
Driving Better Business Decisions
Chances are you use business intelligence systems to make important company-wide decisions that will influence your business years down the road. But what if the information you’re analyzing is incorrect? You could be basing your strategy on incorrect insights drawn from inaccurate data. Companies need error-free data to make informed business decisions with long-term significance.
The Path to Clean, Accurate, and More Timely Information
Creating a single view of your data – whether of your customers, vendors, or counterparties – is not a once and done effort. Nor can it be done by just pulling all your information into a single database and “de-duplicating” it.
The process of data management starts with cleansing and de-duplicating your information, enriching it with relevant information, and constantly maintaining that information on an ongoing basis. What may be up to date today may be gone tomorrow – by way of a bankruptcy, acquisition, new job, or pricing change.
Initial Data Clean-up
The goal of the initial data clean-up is to take your existing databases from across the entire organization and create a “golden source,” free of error. The reality is you may not want to go back and modify all of the information that sits in the databases, rather tie it all together and create a new golden copy. This decision is often unique to the organization or needs being solved. However, when you clean the information it will be important to maintain a common identifying link to bridge the information back into the original database.
Once all of the different sources of information have been identified and extracted in a consistent format, it’s important to deduplicate, standardize, and normalize the data. Standard deduplication tools may often be used to do this – however, the risk of using just a deduplication tool is that it attempts to clean up records based on name and address similarities.
Here, a search for Howmet Ltd., TRACO Inc., and Bev-Pak, Inc. may be perceived as three completely separate entities. When in reality, these are all sub entities of the parent entity Alcoa. To be able to aggregate your total exposure, you need to be able to map these sub entities to their corporate hierarchy.
In the case of companies who have undergone name changes or reference data that leverages just issuer identifier systems, deduplicating against name and address becomes near impossible. In this case, having the ability to deduplicate by matching against a wide range of attributes, including cross-referencing industry identifiers helps to fine tune the deduplication process.
Cross Referencing to Support Data Cleansing and Enrichment
Financial institutions spend millions on licensing different data feeds for a wide range of business problems. They may pull in one feed for security pricing, another for corporate actions, and yet another for screening industry news alerts. In a state of nirvana, all of these feeds would come in with one form of identification, such as the legal entity identifier for business data and other commonly used identifiers for consumer data.
However, the reality is, not all feeds come with this perfect identifier and data that sits within silos may use their own identifier. This may include identifiers such as a DUNS Number, BIC Code, CUSIP, Markit Code, ISIN, Ticker Symbol, LEI or other commonly used identifiers from Moody’s, BVD, Bloomberg, and Dow Jones.
The challenge with working with these different naming and identification systems is that it becomes extremely difficult to deduplicate and/or create a single golden record. This is where cross-referencing as a form of matching comes into play. Since no data set will contain the exact same numbering system, Opus Resolve acts as a Rosetta Stone for these identification systems and matches and cross-references any entity across hundreds of different datasets, so organizations can have one single, accurate view of their data.
Once data is clean, cross-referenced, and accurate, the next step is to enrich the database with additional content that is relevant to the types of decisions your business is making. This may come by way of pulling in information from internal databases (e.g. purchasing behavior) or external providers.
While you may have information such as a name, address, and unique identifiers included as part of the new, deduplicated database, you may wish to add key firmographic information or pricing data to help make better decisions.
For sales and marketing purposes, this can include a company’s industry, key contact, parent company, primary operating systems, telecom providers, revenue, and more. When expanded into compliance and risk management, you may need corporate hierarchies, ratings, scores, sanctions, and adverse media.
Enriching your content with third party sources makes the use of cross-referencing so powerful. If you already have the numbering conventions connected to each record, you can use it as a key to access any of the relevant content that you need to make a decision. Without it, you often need to rely on additional matching tools to match your golden copy against the third-party data sources.
Why Use a Third Party to Help Cleanse and Enrich Your Data?
A big part of data management is investing in the right tools to first clean and then maintain your information. A cleansing service can significantly help in streamlining the process and making sure it’s done correctly. In addition, cleansing services have access to outside vendor data so you don’t have to individually subscribe to premium sources.
Internal data management is tricky to maintain across an organization. Best practices include setting up data quality standards and then training users how to appropriately use the systems. Restricting access is an important way to reduce entry or editing error. Even so, that’s a lot of effort and trouble for organizations.
To address these challenges, Opus offers cleansing and enrichment services so you can have accurate customer, vendor and third party data. You provide us with a file of your entities, and we will match these entities, produce a de-duplicated master file, and append content across public sources (such as LEI, GIIN, CIK) and vendor databases (to which you’re licensed).
Once your data is cleansed and identified, we then keep this golden copy up to date to fight decay and keep you current with changes in external information. We collect data from a variety of premium publishers, our own Authority File, and feeds from internal systems, gathering it in one place so you have a single source for timely, accurate and actionable entity data.
Outsourcing data cleansing and enrichment lets companies focus on what they’re doing as a business – instead of worrying about the details of managing data.
Get Started with Data Management
How can you drive results if you don’t know who your business partners, vendors, suppliers and customers are? Data is one of your company’s most important resources, and even a small error can have major implications to your organizations risk management capabilities. It’s worth it to be diligent, starting now.
Getting started now can save you major remediation later. As capabilities surrounding data and its uses continue to take off, having accurate data only becomes more important.