EDM Council Webinar

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20 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

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Confidential

EDM Council Webinar

Update and Outlook



Michael Atkin

Managing Director, EDM Council


June 12, 2013

1

Data Management Strategy



Standards for the unique and precise
identification of instruments, entities,
language of the contract and
classification schemes (LEI, loan ID,
universal product ID, cash flow, sector
classification, instrument categorization)


(
Identifiers and Ontologies
)

Pillars of Data Operations

Business Drivers














































































































Governance and Infrastructure
(Board
of Directors accountability, independent
validation, integrated data taxonomies,
aligned metadata, standard identifiers,

standard naming conventions,
mechanism for data alignment and
comparability (semantics)


Regulatory Drivers




Data Errors and Repairs

(reconciliation, exception processing,
convoluted models, trade repairs,
valuation miscalculation, settlement
instruction mismatches, bad corporate
action processing)



Data Utilization
(manual processes,
maintenance of proprietary feeds and
interfaces, redundant systems,
duplicate master files, duplicate
accounts, integration and
transformation challenges)



Business Development
(upselling
opportunities, enhanced client
service, new product engineering,
contextual big data mining, process
automation, product and client ROI)



Data Reporting
(links between
instruments (what we trade)


entity
(with whom we do business)


obligations (based on role)


and
holdings (what’s in our portfolios)


Mandatory



Basel Requirements



Transparency

(Dodd
-
Frank,
Regulation AB2, EMIR, UCITS, AIFMD,
COREP, FINREP, ACORD)




Systemic Risk Oversight
(Basel Risk
Data Aggregation Principles, SBSG
Report on Risk Appetite Frameworks,
FSB Key Attributes, FRY
-
14Q, FRY
-
9C)



Capital Requirements
(Basel III, CCAR,
Solvency II)



Functional Areas
(collateral flows,
leverage and liquidity measures,
guarantee and transmission of risk,
degree of diversification, systemic
contagion)




Surveillance

(shadow banking,
electronic execution, concentration of
power, structural vulnerability,
consumer protection, hedge funds,
insurance and reinsurance)



Content Infrastructure


Governance, funding model, TCO and
measurement, requirements
management, resource strategy, business
semantics, business process flows, data
flows, data quality, executable business
rules, integration strategy


(
Data Management Maturity and
Capability Assessment
)




Supervisory Tools
(mandatory tools,

independent audit, capital add
-
ons,
activity limits, pre
-
authorization, cross
regulatory agency coordination)







Risk Data Aggregation
(data quality
-

timely,


accurate, comprehensive, clear), data lineage and


root cause remediation, on
-
demand and ad hoc


reporting capabilities, automated risk aggregation


all relevant business units and functions, near


real time reporting


Internal Assessment (2013
)

Mandatory Compliance (2016)

Data workflow, process capabilities and
limitations, technical architecture, legacy
reconciliation, messaging standards,
metadata management, data
management platform, supply chain
management


(
Technical Architecture, Framework
Standards and Process Engineering
)

IT Environment


Confidential

EDM Council Highlights


Initial FIBO specifications to be
released June 17
(Foundations

and Business Entitles)

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FIBO Technical Summit held June 4
-
5 in

San Francisco
(collaboration

with semantic processing

community)



Liquidity template mapping

to FIBO (Bank of England)



Confidential

EDM Council Highlights


DMM pilot with Microsoft

successfully completed



EDM Council to offer

facilitated DMM assessment

workshops to members


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Office of Financial
Research
(OFR) Financial
Research
Advisory Committee (FRAC)

initial
recommendations


Confidential

Core Regulatory Initiatives

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Dodd
-
Frank Act =
total revision of U.S. financial regulatory environment (transparency, financial stability and market
surveillance implications)


Regulation
AB2

= the SEC’s new regulations on mortgage backed/Asset Backed securities (must be able to unravel
links between loan, tranches, pool, etc.).


UCITS

= Undertakings for Collective Investment in Transferable Securities (EU Directive on simplification of
prospectus

and their expression using clear, accessible and standardized data
).


AIFMD



Alternative Investment Fund Managers Directive (EU proposed law to provide more oversight and
transparency to hedge funds and private equity
).


Basel
III



global regulatory standard on bank capital adequacy, stress testing and market liquidity
risk.


CCAR

= Comprehensive Capital Analysis and Review (stress test methodology in the US; CCAR reporting is putting lots
of pressure on data alignment and comparability.


This includes the FR Y
-
9C (Bank Holding Company Capital Report)
and FR Y
-
14Q (detailed ‘show your calculation methodology work for BHC). This is the US version of Basel
III.


Solvency
II



EU Directive that harmonizes insurance regulation (requirements for capital reserve and reduction of risk
of insolvency)


to be implemented January
2014.


ACORD



Insurance
standards development body (UK) likely to be mandated as the format for
reporting.


COREP

= Common Reporting requirements (developed by Committee of European Banking Supervisors (CEBS) with
the goal of developing a supervisory reporting framework based on common data standards and
formats.


EMIR



European Market Infrastructure Regulation (EU version of Dodd
-
Frank Title VII on derivatives transparency
).


MiFID
II



Revised Markets in Financial Instruments Directive (mostly about trading, but does require common
instrument identification for consolidated pricing
).


FSB
Templates

= Common Data Template for G
-
SIB’s seeking to harmonize the data compounding methodology for
reporting.


Basel
Principles for Effective Risk Data Aggregation and Reporting

= new principles related to the implementation
of a “data control environment” and healthy “risk appetite framework” within systemically important financial
institutions.

Confidential

Common Data Themes

Data Harmonization


alignment of definitions
and the ability to aggregate consistently across
the industry





Data Production


understanding of what it
takes to create new information and link content
for scenario
-
based analysis



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Confidential

Basel Principles for Risk Data Aggregation


Governance
: ownership at the BOD

and executive management level

for enterprise
-
wide adoption

of control environment



Data Infrastructure
: facilitate

comparability and ability to

aggregate on consistent basis



Ad
-
Hoc Reporting
: data that

regulators have confidence in to

facilitate comparability without

reconciliation

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Confidential

Derivatives Transparency

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Validate and Normalize Data
(across SDR’s

and across geography)



Standardize Product Identification
(719(b),

SDR aggregation and OFR instrument

database)



Aggregate and Classify
(type, counterparty,

cash flow, obligation)



Align with Messaging
S
tandards
(FpML,

FIX derivatives, ISO 20022)



Support Complex Analytics
(filter, sort,

search, link, query based on ad
-
hoc scenarios

and on
-
demand)

Confidential

Stress and Liquidity Testing


Data
: alignment of

terms and definitions, product

type classification, integration

of acquisitions



Communication
: clarity of

requirements, data usage,

data production process



Timing
: change requests,

submission deadline conflicts


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Confidential

Confidential


Remember: LEI is a building block for reporting



Separate the characteristics of “
entities
” from the types of

relationships
” that exist among entities from the “
roles

performed in the transaction



This is about describing contractual “facts” and
“relationships” in a formal manner



What
an “entity” is


The types of “entities” that exist


What “ownership” means


What “control” means


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Copyright © 2012 EDM Council Inc.

THIS

Relationship

Entity B

Entity A

Relationship
Types, Definitions,
and Descriptions

Hierarchical Reporting

Confidential

Confidential

FRAC Data Committee (core themes)


Focus on the practical objectives of OFR (advisory
capacity only)



Manage contagion and support predictive analysis



Implement standards to support core capability objectives
(identify, describe, classify and link)



Facilitate data comparability among FSOC member
agencies



Improve data collection process (reduce cost, improve
quality, support analytical flexibility)

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Confidential

Confidential

FRAC/DTS Short
-
Term Goals


LEI quality standards (necessary to fulfill the entity
database obligation)



Employ “legal criteria” for reporting about
relationships (the application of LEI)



Instrument database is a precise description of all
instrument types (what they are and how they
work)



Loan ID and classification are pressing standards
objectives

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Confidential

Confidential

Data Management Maturity Model


Core Model Released (June 2012)



SIFI request to address MRIA orders on data

quality and governance


Hybrid of SCAMPI methodology


Early adoption (30+) and detailed feedback



Revised DMM (April 2013)



Elimination of redundancies and
simplification


Alignment of approach across process areas


Concept clarification and translation to

non
-
specialists


Enhanced relationship to artifacts


Dependency mapping and value

band categorization



Pilot Initiatives and Validation

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Copyright © 2010 EDM Council Inc.

Confidential

DMM: Alignment with Basel RDA

“If the DMM is something our bankers would like us to
consider in the context of the
BCBS Risk Aggregation
Reporting Principles
, let them know we are open to
having a dialogue with them.”


Molly
Scherf

Risk Appetite Working Group

Senior Banking Supervisors Group

Large Bank Supervision

Office of the Comptroller of the Currency

U.S. Department of Treasury

May 2, 2013

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Copyright © 2013 EDM Council Inc.

Basel RDA Data Principles



Accountability for risk aggregation at BOD and
executive management level


Integrated data taxonomies and aligned
metadata


Standard identifiers and naming conventions


Data lineage and root cause remediation


On
-
demand and ad
-
hoc reporting capabilities


Automated risk aggregation across relevant
business units


Scenario
-
based analysis and near real
-
time
reporting


Internal Assessment (2013)

Mandatory Compliance (2016)

Confidential

Confidential

Understanding the DMM


Structure of DMM



Top level is organized into core categories


Categories contain a number of primary components


Components are organized into process areas (containing goals,
core questions and capability practice statements)


Capability practices are organized into levels that are used as
the basis for assessment (with expected artifacts/work products)



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Copyright © 2013 EDM Council Inc.

Capability Practice Levels



Level 0: Incomplete

(not
performed or unstable
processes)


Level 1: Performed

(ad
hoc processes. Emphasis on
data repair. Reactive and transitory improvements)


Level 2: Managed

(formalized processes.
Infrastructure supports at business unit. Clearly
defined roles and responsibilities)


Level 3: Defined

(Established processes. Tailored to
meet specific needs. Predictable and consistent)


Level 4: Measured

(Established metrics. Variance
management across the process lifecycle)


Level 5: Optimized

(processes are improved on a
continuous basis and advocated at the executive
management level)

Confidential

DMM Facilitated Assessment


CMMI Institute and EDM Council service offering
(on request by members)



Workshop Methodology



Collaborative, interactive and shared understanding


Consistent view of the breadth and depth of data management within the organization


Shared language about components, capabilities, core principles and objectives


Consensus scoring with interaction on rationale



Four Step Process


1.
Preparation
: define objectives and recruit stakeholders


2.
Assessment Plan
: establish sequence, define deliverables, determine
responsibilities and set timeframes


3.
Workshop
: managed interviews, verification of requirements, analysis of business
processes/data flows, review of artifacts and analysis of governance


4.
Recommendations
: current state assessment, gap analysis, composite scoring,
final report and executive briefing

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Confidential

Financial Industry Business Ontology

17

Represents real world facts (terms
and standard definitions) and
relationships about financial
instruments, business entities and
transactions

1

Enables classification of
financial instruments into
categories and supports
quality assurance

3

Provide common reference point
for mapping from data
repositories to a common
business data standard

4

Can be used to visually express
all forms of data relationships

5

Facilitates complex
queries for risk and
transitive exposure
analysis

7

Enables risk data
aggregations across
multiple dimensions

6

Integrates easily within
existing environments and
aligns with other standards

2

Confidential

FIBO Developments


Initial Standards Milestone Passed



FIBO Foundations and Business Entities

combined with OMG architectural rigor


Standardization of FIBO methodology in RDF/OWL



FIBO Development



Wave two: securities, loans and derivatives


Wave three: market data, corporate actions

and transactions



Migration to Adaptive Metadata Repository

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Confidential

FIBO Use Case Activities


Derivatives Transparency
(live POC demo)



Operational ontology showing the intersection of interest rate swaps,

credit default obligations and legal entities


Classification based on contractual facts for UPI


Queries about legal entity control and ownership


Alignment with FpML, FIX and ISO 2022 messaging taxonomies



Liquidity Reporting
(underway)



Evaluation of FIBO as a common data language for standardized

and granular reporting


Test of liquidity forms FSA 047
-
054 (data definitions and classification)


Potential to reduce reporting burdens and generate comparable data

in support of ad
-
hoc analysis



Loan Lifecycle
(in discussion)



Align loan and MBS lifecycle with FIBO to support reporting consistency


Support accurate and consistent mapping to MISMO messaging taxonomy


Rationalize FR Y
-
14 data production process and reporting

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Copyright © 2013 EDM Council Inc.

Confidential

FIBO Technical Summit

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Copyright © 2013 EDM Council Inc.

Adaptive
Inc

Alion

Science and
Technology

Black Diamond
Research

Cambridge Intelligence

Cambridge Semantics

CAPSICUM Business
Architects

Carnegie Mellon

Citigroup

EDM Council

Entropy Management
Limited

Expert Systems

FacetApp

Fincore

Ltd

FrankelConsulting

Franz

Global IDs

Google

IHMC

Intellegent

Software
Solutions

Johns Hopkins
University

Manulife
Financial

Michigan State
University/REA

MphasiSy

NIST

OCLC

Ontolog

& CIM3

Ontology Engineering
Group (OEG)/
Universidad
Politécnica

de Madrid

Oracle

Philadelphia
University

Price Waterhouse
Coopers

Quantum4D

Raytheon
-
BBN

Semantic Arts

Smart Cloud
Inc

SRI International

Tahoe Blue

Thematix

Top Quadrant


Bank
of America

University College
Cork, Ireland

W3C

Wells Fargo

Wizdom

Systems

FIBO Summit Technical Objectives


1.
The generation of operational ontologies in
RDF/OWL from conceptual ontologies


2.
Convert requirements (i.e. regulatory rules)
into executable semantic rule statements


3.
Visually represent all forms of semantic
content with enough rigor to support
reasoning


4.
Facilitate the sharing of semantics and
analytics at the scale of the financial system

Confidential

Next Steps for Collaboration Process


Organize
: Create a Semantic Coordination Leadership team with a fixed
membership and published meeting schedule



Fund
: Identify sources and a coordination process for semantic
technology funding



Sustain
: Implement a Semantic Technology Laboratory (Center of
Excellence) as a formal mechanism for the advancement of semantic
technology



Link
: Build and maintain a directory of participants and a listing of
publications/resources for the advancement of semantic technology



Meet
: Implement an annual Semantic Technical and annual Semantic
Applications Summit as checkpoints



Publish
: Provide a mechanism for participants to publish articles and
research related to semantic technology implementation

21

Confidential

Get Ready For …

On
-
Demand and Ad
-
Hoc Reporting


Meeting the needs of macroprudential
oversight is not possible without a trusted
data infrastructure

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Confidential

Don’t Forget the …

Mandatory Alignment with Standards


The goal is automated, enterprise
-
wide
risk reporting. Concordance and data
reconciliation is no longer viable

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Confidential

Built Upon …

Enterprise
-
Wide Governance


Board of Directors and executive
management is responsible for managing
the intractable relationship between risk
appetite and data management

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Confidential

Designed Around …

Data Flows and Business Processes


Provenance over data and how it flows
from process
-
to
-
process with SOX
-
like
certification of capability

25

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Confidential

Managed Through …

Better Supply Chain Management


The goal is to manage the flow of data
from originator


source system


transformation process


transaction


reporting

26

Copyright © 2013 EDM Council Inc.

Confidential

Propelling Vendors …

To New Concepts of Added Value


The data management mandate will
propel data vendors and suppliers to
innovate and integrate in support of
clients enhanced requirements

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Confidential

Opportunity for …

Partnerships and Collaboration


Between business silos, with vendors,
with regulators and across geographic
boundaries

28

Copyright © 2013 EDM Council Inc.