AJ Thompson, Director of Enterprise Solutions at Northdoor
In today’s highly competitive trading environment, financial services organisations need to access, analyse and act on trusted business intelligence in order to gain a competitive edge, whilst also putting appropriate security measures and governance in place to protect themselves against financial, reputational and operational risks.
However, this is not always an easy task, as the enormous volume, velocity and variety of data being used within this sector not only poses a growing challenge to modern data centres, but also forces businesses to ask themselves what they can do in order to turn that data into insight for decision making.
In order to address this issue, today’s financial services firms need to have a robust IT strategy in place to address three key areas: data storage and processing, IT security and business intelligence. However, any decisions made here need to be business-driven, rather than technology driven. When tackled in this way, firms will be able to implement solutions that can store, protect and use their data much more effectively, and therefore enable management to make better business decisions.
Coping with ‘data overload’
Big Data is an evolution not a revolution, and compels organisations to re-examine what they traditionally consider as business information – a definition that has broadened in spectrum recently. The first area that firms need to consider is how they will cope with the vast amount of data that needs to be collected, analysed, used and stored every day. Already, more data has been created in the past few years than in the whole of human history, and the volume is increasing exponentially.
The real challenge for financial services firms, therefore, is how to make sense of all this data. If organisations can make this information more accessible and usable, they can break down silos and improve operational visibility and intelligence to enable real-time data analysis to reveal patterns and trends, and thus improve decision-making at every level.
Modern data storage solutions will have a key role to play here too. The low cost of storage has turned it into a commodity in recent years, and storage infrastructure has therefore mushroomed. The result is often a complex, multivendor storage environment that operates inefficiently, consumes energy to power and cool, and costs much more than the original outlay to manage.
As such, many firms are now using what are known as ‘virtualised infrastructures’ (using a combination of servers, desktops and storage) to deliver greater flexibility and maximise the utilisation of their investment, and to ensure that data is effectively managed, readily retrieved and appropriately used. Integrated data warehousing solutions can also help to increase the efficiency of data loading and analysis, reduce costs, and establish a unified source of data for the entire business. Northdoor recently worked with a leading insurance firm to implement a data warehousing solution based on IBM Netezza. Thanks to the implementation, the insurer now benefits from real-time business analytics with performance improved by more than tenfold.
Balancing IT security with easy access to data
Data security is another key challenge for financial services firms, especially as security breaches have already cost this sector millions of pounds – and show no sign of abating. At the same time, there has never been greater regulatory pressure on the financial industries to safeguard corporate data and the privacy of their customers and stakeholders. Firms are now governed by many different regulations, including Sarbanes Oxley, Solvency II and Basel III.
Unfortunately, a firm’s efforts to comply with these regulations can often be undermined by users, either as a result of careless or premeditated misuse of the firm’s data by its employees. Non-compliance in this area brings very real risks, however, including damage to reputation and brand equity, dented customer confidence, loss of intellectual property, share price erosion, heavy fines and even criminal penalties.
Against this backdrop of unremitting regulation and a rising tide of attacks, firms need to find new ways of protecting their business critical data in line with the legislative framework, whilst also responding to user expectations of having easy access to information. For example, a large number of financial services organisations are now embracing the mobile workforce, yet security in this area remains a challenge for most.
Robust security solutions need to be at the heart of reducing risk in these areas, as well as maintaining and demonstrating regulatory compliance. Often security measures are implemented to prevent specific types of threats. While this approach may solve acute problems, gaps can soon appear. Firms should consider a comprehensive approach to security and make sure that the policies and processes are enforced and supported by senior management.
Transforming data into insight
The third vital piece of the data management puzzle is business intelligence, as organisations will be unable to compete effectively in a global market if their employees and managers are making decisions based on incomplete or out-dated information. As such, all of today’s financial services firms need to have the ability to analyse both structured and non-structured data, from inside and outside the organisation, quickly and easily.
Technology has long been available to transform the huge volumes of data generated on a daily basis into an easily manageable and navigable source of business intelligence. However, it is only recently that we have started to see a shift from a technology-driven approach to more a business-centric strategy. With this approach, firms will be able to gain valuable insight from their data and also perform business reports at speed, since today’s data analytics tools can deliver valuable business insight very quickly.
Deutsche Postbank AG provides a good example of how this process works in practice. As a specialist provider of corporate lending for commercial real estate, the company’s branch management needs to have accurate and timely reports to enable quick and accurate investment decisions. After Northdoor implemented the Smart Analytics System for the company’s London branch, Deutsche Postbank was able to achieve this goal by integrating and reconciling data from multiple sources into a single data warehouse. As a result, the company can now benefit from more accurate management reporting at higher speed and with less effort.
With benefits like these, it is easy to see why a recent study from IBM has shown that nearly two-thirds (63%) of respondents report that the use of information and analytics is creating competitive advantage for their organisations today. Success in this area, however, will depend upon how firms go about identifying and examining the types of data that will be useful and relevant to their organisation, before deciding how to store it, protect it, and use it to achieve the maximum benefits for the business.