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Data is central to every aspect of a business and hence an effective data management strategy is critical for the success of its initiatives. Data reliability increases operational efficiencies, cuts costs, and enables regulatory compliance, and good data governance is key to achieving that. Data governance establishes the policies, procedures, people, infrastructure, and technologies for safe storage, handling, and protection of data. In this regard, the financial services industry has been moving towards the conversion of policies and procedures established on paper into enforceable governance processes. For the BFSI sector, data accountability, traceability, and the availability of accurate data for risk aggregation and reporting are important governance goals.
Regulatory bodies around the world are keenly focusing on data governance. For instance, The Bank of International Settlements (BIS) has published principles of effective risk data aggregation and risk reporting. The Financial Conduct Authority also released similar guidelines in the UK as part of the Prudential Sourcebook for Banks, Building Societies, and Investment Firms (BIPRU). In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has published data maintenance principles for institutions following the International Ratings Based (IRB) approach.
While data governance solutions and tools help organizations understand, secure, and trust their data, banks and other financial institutions often prioritize only mandatory initiatives or those that will deliver a good ROI. To fully realize the potential of available data, banks must look at data governance programs as more than regulatory necessities. They should also adopt an adaptive governance program that will allow flexibility to meet the unique needs of the modern digital organization and to customize as relevant.
Data Governance Regulations
In the banking industry, data governance includes setting data format standards, identifying structured and unstructured data that needs to be protected, tagging data types based on source, creating employee roles and assigning responsibilities, establishing metrics to quantify effectiveness, implementing automation tools, and periodically monitoring to identify areas of improvements.
Understanding the growing importance of data governance, several new regulations have come into existence in recent years. This pressure for transparency and data accuracy originates from financial crises, including the banking collapse in 2008. Personal data and privacy legislation such as the General Data Protection Regulation (GDPR) is globally followed. US federal and state data protection laws such as California Consumer Privacy Act (CCPA) are implemented to improve data privacy. The Gramm-Leach-Bliley Act (GLB) regulates banks’ collection, disclosure, and use of personal /non-public information in the banking industry. Federal Trade Commission (FTC), with guidelines from GLB, acts as the primary protector of banking privacy.
Importance of Data Governance in BFSI
The most common data governance tools BFSI players use focus on incident management, compliance, process management, risk management, audit management, data quality, and security. Combining these traditional tools with Artificial Intelligence (AI) and Machine Learning (ML) will help better identify, retain, and engage customers. With these enhanced data governance models, banks can effectively collect proprietary customer insights to improve the competitiveness of their digital marketing capabilities. These data governance tools also help banking and financial institutions improve their operational efficiency, automate processes, enhance customer satisfaction, improve fraud detection, and support business growth. Data governance also helps monitor and neutralize data security breaches without compromising time or data.
However, many of these benefits are lost to traditional banks, which currently lack the capabilities to process the sheer volume of customer data. According to 2022 Data Governance Trends in Financial Services, addressing the skill gap in cloud technology is the biggest challenge with data governance.
Implementing a Successful Data Governance Program
A data governance program must include the bank’s data governance policy, a defined framework that lists how, what, and where data is being collected, stored, managed, and used, the duties and responsibilities of business leaders, and a data governance committee for implementation and review. Creating a sustainable data governance program requires strong management support. To ensure data governance is not considered only a regulatory measure, banks and financial institutions must
- Clearly set data governance goals based on defined business objectives
- Involve all stakeholders through the planning and execution process
- Define a data management strategy that aligns with the business goals
- Assign employee accountabilities and responsibilities
- Train employees to meet governance objectives across all processes daily
- Develop feedback and review program to make necessary improvements
Banks must assess the business’s data maturity and governance to achieve success with a data governance program. This helps align business objectives with data initiatives, modify governance processes, and redefine SLAs. While regulatory compliance is mandated, it is important to note that every business, even within the same industry, will have different priorities and needs. Data governance is a personalized process that needs to be considered for positive operational and business outcomes. A successful data governance program will help build a secure data foundation for the organization and improve the brand’s image in the eyes of the customers and other stakeholders.
GS Lab | GAVS for BFSI
GS Lab | GAVS is a trusted technology partner for several global banks and financial services companies. We are known for our flexible pricing models, deep domain expertise in core and support processes/technologies, and AI powered digital transformation solutions/services. For more information, please visit https://www.gavstech.com/banking-financial-services/.
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