Efficient data governance – knowing where the data is and who is accountable for it – has never been more important in the financial sector. Driven by the massive increase in data growth that poses great opportunity for operational improvement, along with increasingly complex global data protection regulations, compliance officers in most financial organizations these days are finding new ways to effectively manage data – rapidly shifting from manual processes to automated systems using new technologies such as cloud hosting of services and data.
Drivers for Efficient Data Management
The biggest advantage accruing to data governance for financial organizations is that it enables the company to make quality and reliable data readily available to the key decision makers of the business so that the right decisions can be executed faster.Capturing and archiving text messages, recording voice calls, and retaining all business-related mobile content – when managed and analyzed properly – can also help financial companies to solve client issues better and identify fraud, while ensuring compliance with data protection laws and standards such as the GDPR.
Instilling consumer trust is another key driver for financial companies to ensure efficient data management. In 2017, Equifax was hit by one of the biggest data breaches in history, which resulted in a plummeting stock value and 27% revenue drop. This accident sent a warning to other financial service organizations of the waning consumer confidence about their capability to protect their data against such a cyber threat. Had it happened following the implementation of GDPR, Equifax could have suffered more financial havoc given the hefty fines that the EU can levy against firms with non-compliant data retention management practices.
Dangers of Poor Data Management
Preventing data breach, compliance with various data protection regulations, and ensuring useful business intelligence – these are the aspects where efficient data management is a critical factor.
Without effective data management, firms face risks such as loss of competitive advantage to other more technologically-advanced firms, loss of customer trust, and worse, financial, legal, and even high-profile litigation due to non-compliance with new regulations such as GDPR.
The challenges of ensuring good data governance may seem daunting and outweigh the benefits that good-quality business data enables, but the cost of doing nothing is actually higher. In fact, Gartner found that the average financial impact of poor data on businesses is $9.7 million per year – costs which encompass not only the financial damage, but also the loss of brand reputation, missed business opportunities, and higher-risk decision making.
Data Management Best Practices
1. Ensure A Compliant Cloud Storage Provider
For banks, capital markets services, brokerage firms, and insurance companies, cloud computing appears to be the ideal solution to manage and exploit the growth of big data. As of 2018, the financial sector is the leading market for cloud computing, with 62% of organizations adopting some form of cloud business intelligence (BI) platform.
However, despite the efficiency and cost-savings that cloud-based storage solutions can provide, this option also has its own caveats – one being its multitenant nature. Different public cloud storage solutions also offer varying degree of data ownership, encryption, and masking capabilities, as well as different data availability and integrity, and mobile phone recording features – all of which must be considered before selecting a cloud storage provider.
Financial firms and their chosen cloud storage provider should share responsibility in ensuring proper governance and protection of data. In most cases, it is the financial firm that is responsible for routing the right data to the appropriate cloud repositories to comply with regional data placement standards, while it is the responsibility of the cloud storage provider to ensure that the flow of data in and out of the repositories is done in the most transparent and secure way as possible.
2. Archive Data in a Structured and Organized Manner
Two of the most important provisions in the newly-implemented GDPR is the Right of Access and Right to Erasure – which provides consumers with more control on how their data is being used and grants them the right to have their data erased. It is therefore imperative for financial firms to ensure that all their archived data are organized and structured in a way that would allow them to respond to requests from customers.
Furthermore, financial service companies should also be capable of deleting customer data securely upon subjects request, or once the data no longer serves its purpose. Another key EU regulation, the MIFID II, also requires financial companies to capture and record text messages, voice calls and all other business communications that contain trade information for a minimum of five years. This data must also be archived in structured and organized ways in order to satisfy the reporting standards of the regulators when they request for a copy of specific transactional data.
3. Ensure That All Mobile Communication Data Are Archived in Immutable Format
Finally, data management practices that financial firms should implement include archiving all their business communication records in an immutable format. While most data recovery and backup solutions in the market can provide the company with the copy of data lost in case of a data breach, there is a good chance that most of these data recovery solutions do not have the immutability and access control features that regulators require for a compliant data management process.
Instead, financial firms should opt for a long-term archiving platform that has data integrity controls and audit trails in order to prove that their archived records are indeed authentic and valid. With this platform, financial firms can produce immutable records and determine the methods of how they have been accessed, who has accessed them, and if the records have been tampered in any way.
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