The Board of Governors of the Federal Reserve System released a paper on 2014 detailing the seven principles of an effective capital adequacy process. Principle 6 was notable as it emphasized the importance of robust internal controls around both data and master data, otherwise known as Data Governance:
“Bank Holding Companies (BHCs) that had an effective aggregation process leveraged their business planning and financial and regulatory reporting systems as part of that process. Using standalone tools or spreadsheets in the aggregation process is a weak process. If a BHC needs to use standalone tools or spreadsheets due to systems limitation, management should ensure robust controls are in place, including access and change controls, and should maintain an audit trail and document all approvals for any adjustments made. BHCs should also have reconciliation procedures and data quality and logic checks in place to ensure that the results from the enterprise-wide scenario analysis reconcile to both management reporting and regulatory reports, with a transparent mapping between various reporting taxonomies.” Board of Governors of the Federal Reserve System, Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice, August 2013.
Whilst this Federal Reserve report focuses on a specific subset of financial institutions, the core principle can and should be applied to industry as a whole. The ability to control and understand the impact of change on an organization is a core pillar which underpins good corporate governance.
How DOES Effective Analytical MASTER DATA Governance help?
A subset of the Data Governance discipline is master data governance, where ‘master data’ refers to the non-transactional data that describes a business or other organisation. This discipline concentrates on ensuring that an organisation understands and controls changes to its core business master data. The paragraph above identifies specific process areas where effective master data governance provides significant benefits:
- “…using standalone tools or spreadsheets in the aggregation process is a weak process…”: Effective master data governance standardises and centralises core business master data into a set of processes and applications that gives you control and audit capabilities.
- “...access and change controls…”: Effective master data governance gives you the ability to set access levels for each of your users to ensure the correct people change the relevant structures. Changes are controlled through the effective use of process control and business rules.
- “…transparent mapping between various reporting taxonomies…”: Effective master data governance will allow you to model multiple views of the same core business master data and allow you to understand and enforce the relationship between the various views.
- “…maintain an audit trail…”: An effective master data governance process tracks who does, what, when and why to ensure there is a complete understanding of each and every change to core business master data.
- “…reconciliation procedures…”: Data mappings are maintained alongside source and target master data. Changes to source or target which impact mappings are easily identified and resolved outside of the critical month end period.
- “…data quality and logic checks…”: Effective master data governance validates your master data at point of entry based on rules that you define. Your users can no longer be able to enter incorrect master data by mistake;
Oracle Data Relationship Management (DRM) & Data Relationship Governance Module (DRG)
Oracle DRM and its associated Governance Module are designed to enforce rigid control over an organisations core business maste rdata. DRM itself acts as a repository for all core business structures, and ensures that all master data conforms to pre-configured business rules. The DRG module works alongside DRM to allow an organisation to define the roles and responsibilities in the master data change process. Based on a R(esponsibile)-A(ccountable)-C(onsulted)-I(nformed) matrix, it enables an organisation to define the process, roles and responsibilities for changing master data.
When these two products are embedded into a financial process it is possible to create a fully automated and truly integrated financial process, where users understand changes to core business master data and the subsequent impact on financial data.