Financial Service Companies Need to Prepare for New Regulation

We’re in the midst of a mortgage crisis. Call it a natural extension of capitalism, where greed can inspire unregulated “innovation”. That greed is now coming home to roost.

This problem has many moving pieces and it's difficult to describe in an elevator pitch. By the actions of our leaders and bankers, mortgage lenders were inspired to write dubious mortgages, and the US population was encouraged to apply for them. At first, these unchecked mortgages lead to more free cash, more spending, and a boom in the economy. Unfortunately, the boom was built on a foundation of quicksand. It forced us to take drastic measures to bring balance back to the system. The $700 billion bill already passed is an example to those measures. Hopefully for our government, we won’t need too many more balancing measures.

So where do we go from here? The experts say that the best-case scenario would be for the world economy to do well - unemployment stays low, personal income keeps pace with inflation and real estate prices find a bottom. I'm optimistic that we'll see that day soon. Many of the experts aren't so sure.

One thing that history teaches us is that regulatory oversight is bound to get stiffer after this fiasco. We had similar “innovations” in capitalism with the savings and loan scandal, the artificial dot-com boom, Enron, Tyco and WorldCom. Those scandals where followed up by new worldwide regulations like Sarbanes-Oxley, Bill 198 (Canada), JSOX (Japan) and Deutscher Corporate Governance Kodex (Germany) to name just a few. These laws tightened oversight of the accounting industry and toughen corporate disclosure rules. They also moved to make the leaders of corporations more personally liable for reporting irregularities.

The same should be true after the mortgage crisis. The types of loans that have brought us to this situation may only exist in tightly regulated form in the future. In the coming months, we should see a renewed emphasis on detecting fraud at every step of the process. For the financial services industry especially, it will be more important than ever to have good clean data, accurate business intelligence and holistic data governance to achieve the regulations to come.

If you’re running a company that still can’t get a handle on your customers, has a hard time detecting fraud, has a lot of missing and outlier values in your data, has many systems with many duplicated forms of data values, you’ll want to get started now on your governing your data. Go now, run, since data governance and building intelligence can take years of hard work. The goal here would be to begin to mitigate the potential risk you have in meeting regulatory edicts. If you get going now, you’ll not only beat the rush to comply, but you'll reap the real and immediate benefits of data governance.

Teradata Partners User Group

Road trip! Next week, I’m heading to Teradata Partners User Group and Conference in Las Vegas, and I’m looking forward to it. The event should be a fantastic opportunity to take a peak inside the Teradata world.

The event is a way for Trillium Software to celebrate its partnership with Teradata. This partnership has always made a lot of sense to me. Teradata and Trillium Software have had similar game-plans throughout the years – focus on your core competency, be the best you can be at it, but maintain an open and connectible architecture that allows in other high-end technologies. There are many similarities in the philosophies of the two companies.

Both companies have architecture that works well in particularly large organizations with vast amounts of data. One key feature with Teradata, for example, is that you can linearly expand the database capacity response time by adding more nodes to the existing database. Similarly, with Trillium Software, you can expand the number of records cleansed in real-time by adding more nodes to the cleansing system. Trillium Software uses a load balancing technology called the Director to manage cleansing and matching on multiple servers. In short, both technologies will scale to support very large volumes of complex, global data.

The estimate is for about 4000 Teradata enthusiasts to show up and participate in the event. So, if you’re among them, please come by the Trillium Software exhibit and say hello.

Data Governance and Chicken Parmesan

With the tough economy and shrinking 401K’s, some of my co-workers at Trillium are starting to cut back a bit in personal spending. They talk about how expensive everything is and speak with regret if they don’t bring a lunch instead of buying one at the Trillium cafeteria. Until now, I’ve kept quiet about this topic and waited politely until the conversation turned to say, fantasy football. But between you and me, I don’t agree that there is a huge cost savings with making your own.

Case in point – this weekend, I got the urge to cook a nice chicken parmesan dinner for my family. This time, I was going to make the tomato sauce from scratch and not use the jarred stuff. A trip to the local market to buy all the ingredients for the meal probably cost $12 for the tomatoes, pasta, chicken, breading and spices. There were transportation costs – I spent abut $1.50 on half a gallon of gas. Then, I came home at 2:30 PM and cooked until 5:30, slowly simmering the sauce and using electricity on my stove. So let’s say I used an extra $.50 in electricity. It’s difficult to account for my time. I could have been working on the honey-do list, thus saving me from having to pay someone to do it. Hopefully, that plumbing problem will keep until next weekend. I even could have worked at a minimum wage job at $8/hour or about $24.

When I add up all the hidden costs, the chicken parmesan easily cost me $35-40. Meanwhile, a local restaurant has chicken parmesan for $15.99… and it’s pretty darn good… and it comes with a loaf of homemade bread.

Now I’m sure many of you are asking – what does this have to do with data governance? Everything! When you begin to develop your plan and strategies for your data governance initiative, you have to think about cooking your own or ordering out. Does it make sense to build your own data profiling and data quality processes, or does it make sense to buy one? Will you be pushing off the plumbing to make the meal – in other words, will a more manual home-grown data governance initiative take your team away from necessary tasks that will require emergency service later? Does it make sense to have a team work on hand-coding database extractions and transformation, or would the total economics be better if you bought an ETL tool and focused their time on other pursuits?

Restaurants can sell chicken parmesan for $15.99 and still make a profit because they have the system of making it that uses economy of scale. They buy ingredients cheaper, and because they use the sauce in other dishes, have ‘reusability’ working for them, too. They use the sauce in their eggplant parmesan, spaghetti with meatballs, and many other dishes, and that reuse is powerful. Most of the high-end technologies you choose for your company have to have the same reusability as the sauce for the maximum benefit. Using data quality technologies that only plug into SAP, for example, when your future data governance projects may lead you to Oracle and Tibco and Siperian just doesn’t make sense.

One other consideration - what if something goes wrong with my homemade chicken parmesan? I had little recourse if my own home-cooked solution were to go up in flames, except to get into even more expense and order out. But if the restaurant chicken parmesan is bad, you can call them and they’ll make me another one at no charge. Likewise, you have contractual recourse when a vendor solution doesn’t do what they say it will.

If you’re thinking of cooking up your own technical solutions for data governance hoping to save a ton of money, think again. Your most economical solution might just be to order out.