Gert Raeves, senior vice-president of strategic business development and marketing at GoldenSource, equates the outcome of failing to invest in data management to delaying car maintenance.

Nothing dramatic will happen if you skip the usual service intervals and there is roadside assistance if the car starts breaking. But eventually the wheels will come off - and the cost is not measured in the few extra minutes it took you to get from A to B, but in the fallout from total failure - you are going nowhere.

"Data management is not like breakdown insurance; it won't save you once you are by the side of the road. Rather, it is like a maintenance plan that ensures that your infrastructure is ready for anything that might happen," he says.

By not investing in data management technology, Raeves says that firms may encounter numerous business dilemmas. For instance, the inability to move into new product areas because operational inefficiency will not allow it. This scenario is evident in the classic confirmation backlog that the industry has experienced in fixed income, equities and derivatives over the decades.

Also, the struggle to win customer mandates as sophisticated buyers of services (execution, investment advice, custody, research) are demanding data transparency in order to compare performance.

There are also obstacles, in the form of fines or further mandates, put up by regulators unless data auditability is in place as well as the need to show exposure when things go wrong. Raeves adds that instead of being able to push a button to show exposure, a firm will need to call in forensic teams of accountants and actuaries to unwind a paper trail of contractual obligations across products, counterparties and business lines.

"CFOs and CROs need high-quality data to feed their own financial and risk-reporting goals. If businesses cannot make use of and contribute to automated and centralised data assets, they will have to defer to expensive and errorprone manual alternatives," he says.

In times of stress, firms may be unable to judge their total risk and credit exposure by counterparty or product, adds Raeves. He believes that gaining a complete view of their total risk exposure does require firms to put in place a local data management infrastructure, which is no longer just an informational nice thing to have. "The data management process has become more audit, compliance and risk management-driven than just looking for operational and cost efficiencies, and almost a necessary condition before you can undertake a lot of front office activities," he says.

Many institutions are no longer taking a data silo approach but now turning to a more integrated view and enterprise data management. Firms want a more efficient cross-asset solution that can be quickly and efficiently referenced by many business units, and this is leading to greater adoption of an integrated pricing and reference market data platform.

Raeves notes there is a move to create a single platform to source any type of data that is of value to the business and where all the critical data, whether customer, security or position, is centrally collected, stored and interlinked. "When you are starting to pull together a regulatory, total exposure or financial report, you will need all those data elements. You also need to be able to show that there are consistent, professional and documented processes in place to source, validate the data and create a single representation or a golden copy of the data, to distribute to downstream sources," he says.

Having a single trusted set, or golden copy, of data within a central data management platform accessible by all divisions in a firm is the ideal scenario. Raeves explains that creating a golden copy enables firms to immediately see the connections between all categories of data, the underlying links and dependencies and to understand the credit risk across all components and counterparties for a particular product. "This allows rapid and accurate assessments of risk and profitability for both plain vanilla and complex products, but also detailed insight into the profitability associated with any customer or instrument," he says.