The road to getting data right
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The case for data management and automation may be compelling, but what does the journey look like in practice? This section highlights the steps firms can take in their journey toward seamless data automation.
1. Tackling corporate actions and client/regulatory reporting
Based on our research survey, two areas in most urgent need of attention in Canadian investment operations are corporate actions and client/regulatory reporting. Both are fundamentally data driven and are unavoidable starting points for data transformation.
In the corporate actions space, the average firm carries an annual cost of more than USD 1 million to USD 2 million in errors—60% due to incorrect, late or incomplete data. Like many industry participants, RBC Investor Services recognizes corporate actions as an important area for improvement. With our team of long-tenured corporate actions specialists, we’ve been modernizing and automating our front- and back-endworkflows, allowing us to offer our clients efficient processing and specialist expertise.
What’s more, few would dispute the need for automation and greater flexibility in client and regulatory reporting. Pressures in the space include more local regulatory audits, new market regulations, real-time position statements and 24-hour trading reports—all of which demand new, more accurate and faster data are a daily reality for many firms.
2. A new form of due diligence
Data transformation is no longer just about getting more data into the system or helping it to move around more freely. Following extensive regulatory pressures over the last several years, the primary considerations for investment operations teams are whether data can be accessed safely and where that data resides.
After years of highly publicized hacking incidents, the advent of DORA (and similar, imminent regulations in North America) means that firms are now responsible for their own due diligence on the safety and resilience of their third-party providers. If a firm is taking in real-time pricing updates from a vendor, it must ensure it’s fully aware of and actively managing the risks involved in that data transfer. Equally, if client data is shared in a cloud-based platform, the investment firm is accountable for ensuring the security of that platform. This shift in responsibilities (and liabilities) is driving an industry-wide transformation in how firms approach IT and cyber risk management.
Data residency is also a critical consideration, driving investment managers to ask and define exactly where their data is to be stored and managed for the first time. With a growing number of client agreements defining requirements around residency (including many that require all critical data to reside in Canada), the pressure on firms to manage due diligence and an increasing audit burden is one of the most significant changes in the ways that data is to be managed in the 21st century.
Proactive management of these considerations is now a core competency for all operations teams.
3. Data governance critical as firms grow
The pressures around data governance and transparency are hitting all firms, but those with assets under management (AUM) of CAD 6 billion to CAD 25 billion are being disproportionately impacted. While smaller firms are largely able to escape many of the pressures described above (leveraging low-cost and simple operating models), firms reaching this AUM level face a clear threshold where data governance becomes a core competency. At this stage, they need to implement new procedures, put new operating models in place and create new oversight mechanisms. While different firms choose to respond in different ways (e.g. outsourcing, new system builds and greater cooperation with custodians), the need for change at this stage is very clear.
It’s important for firms to anticipate this threshold. Several Canadian investment managers have recently reached it only to realize they needed to overhaul their front-to-back processing platforms—an expensive and disruptive process. Planning ahead by prioritizing scalable data architecture from the start allows for faster data flow, easier integration and long-term flexibility.
4. Scalability: Fuelling future innovation
With one in six Canadian investment managers seeing underperformance in their back offices today—manifesting in core challenges in valuations, corporate actions and reporting—the case for data transformation today is highly compelling.
Not only does investment in data management help to avoid downside risk, but it can also generate valuable operational beta in fund performance so that it directly and positively drives P&Ls today. Managed intelligently and with due care, investment in data can transform Canadian investment operations.
Looking ahead, the case for data transformation is only set to grow, with new climate reporting requirements due and an increasing wave of artificial intelligence adoption across the industry.
Data has never been more important to Canadian back offices.
Data accountability resides within the RBC Investor Services business
RBC Investor Services has a robust governance model in place across our data lifecycle to manage and control data, ensuring it’s safe, secure, accurate and trusted by clients. Data accountability resides within the RBC Investor Services business, and our Data Management Office plays an important role in the adoption and execution of enterprise-wide data standards and best practices. A central, multi-disciplinary governing body oversees our data activities, ensuring they align with business objectives.
