Financial institutions have long grappled with challenges regarding risk data aggregation and risk reporting. The principles of BCBS 239 set high standards for governance, IT infrastructure, and data management. Complying with these principles equips financial institutions with the tools to make the most of their risk data and risk management. Key to this is data linage, interoperability, and data standards.

How can financial institutions capitalise on technology to make the most of their risk data? In this blog we discuss the above topics and explain how they will affect your firm.

Data Linage
To understand the importance of a data lineage solution, it is helpful to consider why data lineage, a virtually unheeded subject only a few years ago, should now be of such interest. The answer is that in an increasingly digital world, an optimised data architecture can be the differentiator between a successful enterprise and a failed one, and data lineage is the sole objective assurance available to management to prove that the planned data architecture has been accurately implemented.

The value of a data lineage solution is directly related to how easily it enables the capture of lineage data and how effectively it facilitates sharing that data across the organisation. Solidatus helps organisations tackle the four key problems around data lineage:

REGULATE
Data lineage demonstrates how organisations achieve results, with regulators highlighting how data lineage is necessary for transparency and confidence in data governance.

TRANSFORM
Where many systems are involved across multiple departments in transformational projects, lineage can play a pivotal role in mitigating risk and assessing impacts.

OPTIMISE
With data lineage, you can have visibility of all organisational systems and data flows, making it easy to identify redundancies and improve operational efficiencies.

GOVERN
Data governance is the management and control of data where usage, accuracy and integrity of data assets are monitored. To achieve confidence in governance, you need data lineage.

Since its inception, Solidatus has been designed to provide world-leading visualisation of lineage and the attendant metadata that informs and contextualises that lineage. Developed for their own use by practitioners with many years of experience of implementing data lineage programmes in global organisations, the founders knew that Solidatus must enable an organisation to develop a data landscape quickly, crowdsource metadata, agree on terminology, and analyse data usage throughout their systems to deliver comprehensive data lineage. In addition, the solution had to facilitate effective collaboration and promote efficiencies through automation.

Interoperability
The ability to share information between systems and applications is increasingly important as we transition to a digital landscape. As we rely on multiple technologies, data providers and software solutions, interoperability is key to ensuring tech stacks work together.

This is especially important for achieving effective data lineage and data management. As – different tech stacks and databases are connected with one another, a data lineage system must be able to trace the transformations of the data through the connected tech stacks and databases. To this end, systems must be interoperable to allow for the requisite connections to be made between different departments dealing with a particular data set. Interoperability effectively ensures that data lineage can operate across departments, databases, and systems.

APIs, short for application programming interface, are a powerful way to achieve interoperability. APIs are used by developers to securely connect different systems. The architectural style of REST APIs is a particularly promising functionality. Due to their scalability and simplicity, REST APIs can be applied to a wide range of use cases making interoperability across many systems possible.

For interoperability to be functional and effective, it should form an integral part of the development process for any new software. As systems no longer operate in isolation, it is essential that interoperability be built into the development process. For example, a new software tool in a financial institution, should be developed with capabilities to fit into a lineage world, a data management world, and a governance world. With the continued growth in the breadth of tech stacks adopted by financial institutions, incorporating interoperability through REST APIs in the development process ensures that any new software tools do not stand in isolation.

Suade’s regulatory reporting solution uses REST APIs to allow easy connectivity between a financial institution’s internal systems and external software solutions on the one hand, and the Suade software on the other. Thanks to the REST API, integration is easy, while the integrated systems do not lose any of their processing power. Suade’s RESTful API has allowed financial institutions to push millions of rows of data into the Suade solution from different departments across their institutions to produce regulatory reports in Suade’s powerful software –data lineage is essential to this process; another key tool is data standardisation.

Data standardisation
Data sits at the heart of effective data lineage and interoperable systems. At the same time, data lineage is fundamental for governing data. Through a data lineage solution, it is possible to monitor the usage, accuracy, and integrity of data. Working on the data itself can further facilitate this process. One effective mechanism is the standardisation of data.

Data standardisation ensures that data across a financial institution is in the same format and on the same scale. This allows for comparability across departments. With large financial institutions, data standardisation can make a significant difference to data lineage, interoperability and importantly, regulatory reporting in general. Tracking data transformations becomes a more straightforward process with standardised data because the element of data disparities is removed; there is also no longer a need to continuously redefine REST APIs.

The global, open-source data standard FIRE, standardises data at financial institutions using definitions in financial regulation. This ensures that financial institutions process and store the data required under financial regulation. Combining FIRE with Suade’s powerful RegTech solution makes compliance with a variety of regulatory requirements more straightforward, whilst the accuracy of data submissions to regulators is improved. Coupled with an effective data lineage solution, financial institutions are able to optimise their data flows and create a full and comprehensive picture of all data transformations to achieve effective data governance.

To find out more about the topics discussed and how Suade is partnering with financial institutions to solve industry challenges, get in touch with our team.

Watch the webinar with Solidatus, which explores this in more detail, here.