Part 2 :: Origins
When financial firms began establishing the chief data officer role in response to stepped up regulation in the early 2010s, their focus was on compliance. The CDO’s immediate tasks involved setting up rules for data governance and building platforms to implement them. Their mission was relatively simple: satisfy regulatory requirements, reduce business risk and ensure that data was transparent. As one U.S. commercial bank’s CDO put it, his job was to “keep the regulator happy and as far away as possible.”
While setting up an approach to meeting regulatory requirements was technically challenging, once the proper systems and procedures were in place, the work became more about compliance than strategy. In the U.S. especially the more CDOs settled into their roles the more they recognized just how tightly data was knitted into their company’s business. The information they’d been concerned with from a regulatory perspective offered great value in and of itself.
In short, they realized their data could be monetized. It didn’t take long for CDOs to grasp that data could identify efficiencies that reduced expenses, or even generate revenue by using its insights as a product. Many believed that not exploring these new paths would damage their firms. Focusing “purely on the end result on the regulatory side has really hurt the industry,” says the former CDO of one U.S. investment bank. “What they really need to do is focus on the base data. If you get that right, then it’ll flow through.”
The situation differs somewhat in Europe, where a more challenging business environment and still-evolving regulatory landscape has led few firms to put a CDO in place. While the role is still in its early stages, it’s development does mimic the U.S. in that European CDOs mostly work on the sell side.
Keeping the focus on data quality
Whether in Europe or stateside, however, getting the data right is easier said than done — especially when the CDO’s thinking has outpaced the organization’s. Many CDOs believe that internal stakeholders don’t understand how data governance and its supporting infrastructure offer business value. Making things more complicated is a lack of understanding about the CDO’s role and the importance of their strategic voice.
That lack of understanding often puts CDOs in a position that lessened their effectiveness. Most are housed within either IT or operations, though many believe they’d be better situated between the business and IT. The best CDOs understand the business, the importance of data governance and how the firm can put data to use. Without that knowledge, improperly handled data represents not only a regulatory risk but a missed business opportunity. “A lot of technologists, they’re not prepared to ensure that the technology delivers the appropriate data quality or even to know what questions to ask to figure out what data quality is necessary,” says the former CDO of another U.S. bank.
One reason CDOs can recognize these opportunities stems from the regulation that concerned them in the first place. “Every Fed examiner asks the same question,” said the CDO of an investment bank in Asia. “’What are you doing to ensure the quality of the data that goes into this report?’ I would like to demonstrate for them our entire model of how we acquire, process, persist, render and integrate data.”
Some CDOS are thinking about how to solve business problems by setting benchmarks. For one head of reference data at a U.S. investment bank, it’s about the number of incidents they have: “The number of exceptions that we generate are aging, particularly over 30 days. It can range anywhere from pricing exceptions to product variance issues or lack of capability. [For example] how long it takes for us to set up a request to trade.”
The varied traits of a successful CDO
Because of their unique perspective, demonstrating—really evangelizing—the value of data quality has fallen to the CDO. Since the role is so new, regulations so challenging and the potential value of data itself so enormous, successful CDOs require a range of common traits to effectively tell their story: they understand their firm’s core business processes; they’re able communicators; they’re flexible and willing to learn and adapt as regulations, technology and business practices evolve; and they keep up with industry and technology trends.
They’re also helped by their own track record. Many CDOs have worked at their company for years, which gives them credibility as well as experience. Not only do they know where data can be found, they understand its purpose. That kind of foundational knowledge makes them uniquely suited to identify which information has value to the market.
Just as important, their credibility helps them get their message out. CDOs must raise awareness about data and its importance, and their own role in exploiting it, educating employees and clients about why it’s valuable and how its quality can be assured. That communication becomes the driving force in changing the organization’s culture, so that it recognizes the role data quality and governance play not only in its operations and compliance efforts, but in its continued efforts to grow.
