Mark Holland, Partner and co-Founder at business transformation consultancy Holley Holland, explains how looming issues such as the possible Brexit highlight the urgency of shifting strategy towards data
It wasn’t supposed to happen like this. Nearly every pollster, commentator and talking head going predicted a hung parliament in May’s election. In such a scenario the Conservative party would likely have found it easy to negotiate their way out of any commitment to an EU referendum.
Go deeper with GlobalData
Their surprise victory left them with no such wriggle room. As a result, we are now facing the very real prospect of a British exit from the European Union, with a referendum potentially being held as early as next year.
The UK’s banking sector has been quick off the mark to voice its concerns. Most notably, Deutsche Bank has publicly signalled that it will be reviewing the case for moving chunks of its hefty UK operations to Germany in the case of a Brexit. It has set up a working group to weigh the pros and cons of remaining headquartered in London if Britain were to leave.
The weighty decision
It is unclear at this stage what an exit would entail. Adding yet more uncertainty is the fact that the vote will not be on the status quo, but rather Cameron’s reformed deal, for which long negotiations have only just begun.
Nonetheless this is a scenario banks will be forced to consider in earnest sooner or later. And one thing that is certain is that the question will be a deeply complicated and multi-faceted one. It will carry repercussions right across the spectrum, touching on almost all aspects of banking operations.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThere will be tax implications – for instance the UK has the lowest corporation tax in Europe, and departure from the EU could pave the way for an even friendlier regime. There will be regulatory implications – banks currently benefit tremendously from EU passporting provisions, and it is unclear as to what extent a non-EU Britain would retain these. All of these factors will interact in a complex way. The very best possible information, combined with a clear and single view of the whole business, will be crucial to any decision.
All of this goes to underscore the need for better data management and joined-up infrastructure within banks. Strategic decisions of this magnitude cannot possibly be made properly without creating a logical dataset of all of the organisation’s data and having the ability to then glean useful insight from this data. Yet much of the current existing data environment in banks does not allow for either.
Historically, the growth of banks has tended to be a sum of the growth of their different business lines – retail, investment banking, insurance, and so on. Most will typically have started as separate, relatively self-contained business units. They will have grown in silos, often at different times and using radically different systems to one another. As a consequence, banks’ data has also grown up organically in these same silos.
The only place in which all this data normally comes together is in accounting, in the ledger. And yet the ledger – while providing a consolidated view of sorts – is often only an aggregation of transactions. The underlying detail either gets lost or remains stuck in the various sub-systems.
The push to rectify this and shift towards an enterprise view of data – whereby information from these disparate business units is ‘cleaned’ and brought together into one consolidated layer, providing a single view of the whole organisation – is, of course, a well-worn topic in the industry.
The need for evolution
Banks have been aware of the need to make a change for some time. Yet very little progress has been made. Since the crisis the issue has fallen down the agenda. Banks have been forced onto the back foot, their time and attention consumed with tactical firefighting in response to onerous new regulatory demands and deadlines.
There is a slight irony here in that many of these new regulatory obligations actually increase the need for a holistic view of data within these organisations. Stress testing, for instance, requires banks to be able to calculate the impact of certain scenarios right across the entire business. And banks are now required to provide regulators with a far more in-depth, detailed picture of business goings-on on a more regular basis in order to better allow the regulator to monitor and minimise systemic risk. So in its own way the regulatory agenda is driving demand for precisely this sort of beefed-up aggregation layer. However, the pressured environment means that this transition – if it is happening at all – is happening in a piecemeal, reactive manner, as opposed to the longer-term, wholesale transformation project it needs to be.
Thinking on a grander scale
Part of the problem with the short-term, reactive approach is that the creation of a proper consolidated aggregation layer often demands long-term planning and investment due to the challenges involved.
The abstract notion of collecting all of your data into one place is a simple enough idea. But it is easier said than done. The collection of the data itself is merely step one of an arduous journey. Given the sheer volumes of data involved in the industry (we’re talking datasets with billions of rows here), there is a significant technological challenge in turning this data into something useful in a timely and efficient fashion. This is why we’re seeing such a drive to improve computing times.
And this is before even considering the thorny question of ‘cleaning’ the data from the multiple sub-systems to ensure consistency and accuracy. The inescapable fact of the matter for most banks is that a proper move to an enterprise view of data will require substantial time, planning, and cost. It will not, and should not, happen in an uncoordinated fashion as a result of adapting to new regulatory demands.
What the sudden prospect of a Brexit referendum highlights is the importance of this undertaking, and the seriousness with which banks ought to take it. The post-crash environment has (understandably) subordinated the issue to the more immediate demands of regulators.
Those banks that get this right will put themselves in a far better position to make long-term strategic decisions to their own benefit.
The Brexit is just one example, and may come to nothing. But it is symbolic of the newly complex, global and uncertain world banks find themselves in, and highlights the increased need for big-picture thinking, for which an enterprise view of data is a crucial ingredient.
