Manage Your Data Vendors to Improve Quality and Reduce Total Cost

Guest Contributor: Thomas C. Redman, “The Data Doc”, Navesink Consulting Group

Financial institutions need high-quality data, about markets, counterparties, and so forth, acquired from outside.  Most follow the so-called “golden copy” approach.  They obtain data from many sources, compare them, pick the one that they think most likely correct, and anoint it as “golden.”

Good logical thinking.  But, in most cases, it guarantees that they pay too much and don’t get the high-quality data they need.  If the automobile industry followed such an approach, a manufacturer would buy four starters, try each out in the new car, pick the one that starts the car most quickly and efficiently, paint it gold, and throw the other three away.   That’s no way to run an assembly line!  No, the best manufacturers (in any industry) take a more-proactive approach to supplier management.

A few institutions have pioneered this more pro-active approach for financial data and they enjoy rich rewards for their troubles!  The basic steps are simple.  For each of their most important suppliers, they:

  1. Create a small team consisting of institution and supplier members charged with making improvements,
  2. Develop and communicate clear requirements,
  3. Study supplier-supplier measurements against those requirements,
  4. In an iterative fashion, point the supplier at the most important gaps.  The supplier then conducts improvement projects to find and eliminate the root causes of error.
  5. Repeat steps 2-4 as new needs for the data arise.
  6. Conduct yearly reviews to baseline the supplier’s overall quality program, audit measurement results, and look for ways to work more effectively with the supplier.

While results vary, an order of magnitude reduction in the error rate is pretty typical.  The financial institution benefits because it has one trusted source for data it needs most.  Note I am not saying “one trusted source for everything.”  It may have one trusted source for US munis, another for European equities, and so forth.  Trusted sources enable it to both to reduce its overall supplier base and to address its new data needs more proactively.

Importantly, the supplier benefits as well.  All of its customers benefit from improved data, improving customer satisfaction!  It receives fewer calls to the help desk.  Most importantly, it can use its deeper understanding of evolving customer needs and improvement results to better sell to others.

Net, net, a big win for everyone.  More financial institutions should follow the path paved by these pioneers.

To hear more from Thomas Redman, better know as the “Data Doc”, attend  Navigating the LEI Landscape for 2012 and Beyond on September 19, 2012.  Check out the agenda details here.

This entry was posted in Data Management, Guest Blog and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s