FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Top 10 Root Causes of Data Quality : The Basics – Part 1

We all know data quality problems when we see them.  They can undermine your organization’s ability to work efficiently, comply with government regulations and make revenue. The specific technical problems include missing data, misfielded attributes, duplicate records and broken data models to name just a few.

But rather than merely patching up bad data, most experts agree that the best strategy for fighting data quality issues is to understand the root causes and put new processes in place to prevent them.  This five part blog series discusses the top ten root causes of data quality problems and suggests steps the business can implement to prevent them.

In this first blog post, we’ll confront some of the more obvious root causes of data quality problems.

Root Cause Number  (1) One : Typographical Errors and Non-Conforming Data
Despite a lot of automation in our data architecture these days, data is still typed into Web forms and other user interfaces by people. A common source of data inaccuracy is that the person manually entering the data just makes a mistake. People mistype. They choose the wrong entry from a list. They enter the right data value into the wrong box.

Given complete freedom on a data field, those who enter data have to go from memory.  Is the vendor named Grainger, WW Granger, or W. W. Grainger? Ideally, there should be a corporate-wide set of reference data so that forms help users find the right vendor, customer name, city, part number, and so on.

Root Cause Attack Plan

  • Training – Make sure that those people who enter data know the impact they have on downstream applications.
  • Metadata Definitions – By locking down exactly what people can enter into a field using a definitive list, many problems can be alleviated. This metadata (for vendor names, part numbers, and so on can) become part of data quality in data integration, business applications and other solutions.
  • Monitoring – Make public the results of poorly entered data and praise those who enter data correctly. You can keep track of this with data monitoring software such as the Talend Data Quality Portal.
  • Real-time Validation – In addition to forms, validation data quality tools can be implemented to validate addresses, e-mail addresses and other important information as it is entered. Ensure that your data quality solution provides the ability to deploy data quality in application server environments, in the cloud or in an enterprise service bus (ESB).

Root Cause Number (2) Two : Information Obfuscation
Data entry errors might not be completely by mistake. How often do people give incomplete or incorrect information to safeguard their privacy?  If there is nothing at stake for those who enter data, there will be a tendency to fudge.

Even if the people entering data want to do the right thing, sometimes they cannot. If a field is not available, an alternate field is often used. This can lead to such data quality issues as having Tax ID numbers in the name field or contact information in the comments field.

Root Cause Attack Plan

  • Reward – Offer an incentive for those who enter personal data correctly. This should be focused on those who enter data from the outside, like those using Web forms. Employees should not need a reward to do their job. The type of reward will depend upon how important it is to have the correct information.
  • Accessibility – As a technologist in charge of data stewardship, be open and accessible about criticism from users. Give them a voice when processes change requiring technology change.  If you’re not accessible, users will look for quiet ways around your forms validation.
  • Real-time Validation – In addition to forms, validation data quality tools can be implemented to validate addresses, e-mail addresses and other important information as it is entered.

This post is an excerpt from a white paper available here. More to come on this subject in the days ahead.

Source: 24.08.2011 Steve Sarsfield – The Data Governance and Data Quality Insider

Filed under: Data Management, Library, Standards, , , , , , ,

BM&F BOVESPA News June 2010

“Brazil Easy Investing” will allow foreign investors to order routing in their local currencies
BM&FBOVESPA and Chi-X Global are jointly developing an order routing software designed for the trading of Brazilian equities in foreign currencies.
Launch of five new Currency Futures Contracts in the BM&F segment for trading
Australian Dollar (AUD), Canadian Dollar (CAD), Japanese Yen (JPY), Pound Sterling (GBP) and Mexican Peso (MXN) contacts are authorized for trading.
DMA trading reaches historic levels in the BM&F segment
Derivatives trading via Direct Market Access (DMA) set a new record in May, with 20,949,961 contracts traded in 3,040,357 trades. Other records were set during the same period.
Bidding Process for the selection of a manager for the new financial ETF
Interested financial entities must submit their proposals by no later than July 19th. The winning bidder will be the entity that provides the highest value commitment.
Important agreement to stimulate the relationship between entrepreneurs and investors
The partnership of BM&FBOVESPA and São José dos Campos Technology Park hopes to establish a culture of entrepreneurship and innovation, through professional training.
Brazil elected as the most trustworthy country among the developing nations for doing business
A survey of investors from all over the world showed that they considered Brazil to be the developing country with the best corporative governance.
WFE Working Committee Meeting will be hosted by BM&FBOVESPA
BM&FBOVESPA will host the World Federation of Exchanges (WFE) Working Committee on July, 1st and 2nd, in São Paulo. Main topic to be discussed will be “Sustainable Investment”
Corporate Sustainability Index (ISE) completes five years with enhancements to the next portfolio
The companies listed on ISE are recognized for their high level of commitment to sustainability and social responsibility.
MARKET RESULTS – BM&F Segment May 2010
The derivatives market segment totaled 52,063,826 contracts and BRL3.57 trillion in volume. The average daily trading volume in the derivatives markets was 2,479,230.
The equities market segment reached a total volume of BRL152.93 billion, in 10.261.145 trades, setting a new record, with daily averages of BRL7.28 billion and 488,626 trades.

Source: BM&FBOVESPA, 30.06.2010

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, , , , , , , , , , , , , , , , ,

Charles River Expands Brazil and Latin America Presence

Charles River Development has expanded its regional presence in Sao Paulo, Brazil with local, multi-lingual employees providing implementation, consulting and support services for regional clients and prospects.

In a company statement, Manuel Astiasaran, Director of Operations in Latin America for Charles River, said, “Our expanding client base reflects Latin America’s changing regulatory climate. Heavy regulation limiting investment to domestic securities has been relaxed, such as the 2009 regulation from Brazil’s Commisso de Valores Mobilirios, making way for international investments. This has increased buy-side demand for front- to middle-office systems that automate domestic and international investment operations.”

The Charles River Investment Managing System (IMS) is available in Portuguese and Spanish and supports region-specific security types and workflows, including Mexican corporate and government bonds, as well as Brazil’s CDI-linked debentures and complex inflation-linked government notes.

The Charles River IMS includes pre-built compliance libraries with rules across 35 regulatory bodies in 20 countries, including rule libraries for Mexico, Brazil and Chile.

Source: Advanced Trading, 06.04.2010

Filed under: BM&FBOVESPA, BMV - Mexico, Brazil, Chile, Latin America, Mexico, News, Risk Management, Trading Technology, , , , , , , , , , , ,

Brazil: Petrobras and VisaNet under investigation

Petrobras Probe Starts as Gabrielli Faces ‘Crisis’

Aug. 6 (Bloomberg) — Petroleo Brasileiro SA, struggling to meet output targets and finance a $174 billion spending plan, faces a new challenge today as Brazil’s Senate probes claims it evaded taxes and funneled cash to government allies.

The investigation, prompted by opponents of Brazilian President Luiz Inacio Lula da Silva, focuses on allegations Rio de Janeiro-based Petrobras evaded 4.4 billion reais ($2.4 billion) of taxes, overpaid for goods and may have favored the president’s supporters when it made charitable donations. Chief Executive Officer Jose Sergio Gabrielli denies the claims.  Read full article by Bloomberg here

VisaNet Faces Antitrust Probe by Brazilian Justice

Aug. 6 (Bloomberg) — Cia. Brasileira de Meios de Pagamento, the credit-card company known as VisaNet, is being investigated for possible anti-competitive practices by the Brazilian Justice Ministry.

The probe also involves Visa do Brasil Empreendimentos Ltda. and Visa International Service Association, the ministry said in an e-mailed statement today. The ministry, through its Economic Law Department, or SDE in the Brazilian acronym, will assess the exclusive right of VisaNet to accredit businesses to accept cards carrying the Visa logo.

This “practice” is against consumer interests and “substantially” reduces competition in the industry, the ministry said in the statement. Read full article by Bloomberg here

Source: Bloomberg, 06.08.2009

Filed under: Brazil, Latin America, News, Risk Management, , , , , , , , , , ,

Rapid loan growth puts Chinese banks at Risk

Aggressive loan growth could significantly stretch the banks’ newly developed risk management systems, and the quality of new loans is expected to be inferior to the quality of those written a year ago, S&P analysts say.

Loan growth among Chinese banks hit more than Rmb7.76 trillion ($1.13 trillion) in the first half of 2009, a record high. As a result, asset quality is likely to slip further in 2009, but should remain highly manageable. It could deteriorate sharply in the next two to three years, however, if the economic slowdown is protracted in China.

Chinese banks seem to be lending so aggressively despite the economic slowdown for three key reasons.

First, the strong growth suggests that the banks’ corporate governance is still relatively weak and that the government continues to exert strong influence over banking practices as a dominant shareholder.

Second, the banks appear willing to extend additional funding to borrowers facing cash-flow difficulties on the premise that such difficulties are short-term in nature and should correct themselves when China’s growth recovers.

And third, they may be looking to compensate for the negative effects on earnings from the squeeze in net interest margins.

We expect the quality of new loans to be on average inferior to the banks’ loan book a year ago. That’s because the banks are either expanding into an enlarged but inferior client base or making incremental loans to existing clients with deteriorated financial metrics. Some new borrowers had no or limited access to bank credit in the past because they didn’t meet previous underwriting standards. But banks are likely to have eased their underwriting standards for projects related to the government’s stimulus package, as the government relaxed the capital leverage requirement for many types of projects. Loan quality should, however, be adequate for infrastructure projects that the central government or affluent provincial governments have backed; but these loans perhaps represent only a fraction of total new lending.

While further slippage in bad loans in 2009 and 2010 is likely in our view, it should be at a manageable pace. This is due to the very supportive liquidity environment for corporations as a result of strong loan growth, the limited exposure of major banks to severely hit small businesses in the export sector, and signs of economic recovery, particularly at home. A jump in the non-performing loan ratio is still very likely, as the dilutive effect gradually wanes and banks eventually stop renewing loans.

Barring a protracted slowdown in the Chinese economy, we anticipate the system will on average be able absorb incremental credit costs, given still healthy official interest spreads and banks’ improving capacity to generate fee-based income. For banks that are aggressively increasing their exposure in concentrated segments or regions, we expect potential credit losses to significantly weigh down their already below-average earnings profile. This is likely to lead to further divergence in credit profiles across the sector.

The aggressive loan growth in the first six months of this year could significantly stretch Chinese banks’ newly developed risk management systems and undermine their underdeveloped risk culture. Inflationary pressure may be the single-largest macroeconomic risk that the banks face. Historically in China, inflation often followed when loan growth ran above 20% (it was about 30% year-over-year at the end of June 2009). We’ll have to wait to see if this time will be an exception as the global economic slowdown continues to weigh on overall pricing levels. If the inflation pressure becomes so acute that the government resorts to a policy u-turn and increases lending restrictions, the heightened policy risks could exacerbate the difficulties for borrowers and banks.

The government’s role and commitment to reforms

The government remains highly influential with regard to lending policy at the banks, in our view. It has encouraged banks to make loans to prevent the economy from making a hard landing. But some government agencies, particularly the China Banking Regulatory Commission, have continually warned against excessive lending. Recently, the government seems to be fine-tuning its policy to favour a greater check on bank loan growth. The central government appears to have a delicate balancing act. It’s trying to use bank credit as a lever to maintain economic growth while preserving the banking system’s fundamental strengths. This reflects an inherent conflict between the government’s different roles as the country’s policymaker, banking regulator and major shareholder.

There are still strong incentives for the government to press ahead with banking reforms. The aggressive response to the government’s call for greater lending indicates that the banks do not yet have a sound risk culture and effective corporate governance in place. Given the experience in some markets, Chinese policymakers are likely to take a cautious approach to deregulating relatively risky activities and products. They’re also likely to slow down some reforms, such as those regarding compensation schemes. Some recent initiatives, such as those related to the development of the debt market and renminbi convertibility, indicate the government’s intention to proceed with market-oriented banking reforms.

Ratings impact on Chinese banks

We believe the major rated banks have sufficient financial strength to weather the economic slowdown. Although we see growing pressure from credit risks, policy risks and other risks for the banking sector, these are still within our expectation. We have long factored the significant volatility in Chinese banks’ financial metrics into the ratings on banks. If we are convinced that any bank has been performing better than we originally expected due to its own structural strengths, we would acknowledge these strengths against the context of a less-supportive operating environment.

Ratings On Chinese Banks
Banks Issuer Credit Rating
Industrial and Commercial Bank of China Ltd. A-/Positive/A-2
China Construction Bank Corp. A-/Stable/A-2
Bank of China Ltd. A-/Stable/A-2
Bank of Communications Co. Ltd. BBB+/Stable/
China Merchants Bank Co. Ltd. BBB-/Stable/A-3
CITIC Group BBB-/Watch Pos/A-3
Agricultural Development Bank of China A+/Stable/A-1+
China Development Bank A+/Stable/A-1+
Export-Import Bank of China A+/Stable/A-1+
Note: Ratings as of July 20, 2009.

The authors of this article, Qiang Liao and Ryan Tsang, are senior analysts in the financial institutions ratings team at Standard & Poor’s Ratings Services., 23.07.2009

Filed under: Asia, Banking, China, News, Risk Management, Services, , , , , , , , , , , ,

Framework Approach to Governance, Risk Management, & Compliance

The landscape of governance, risk management, and compliance initiatives is broad and littered with a variety of specific standards and frameworks. Each of these specific frameworks may be good at what they focus on – but they fail to link GRC together and put everything in context with each other. Risk management, security, corporate governance, control, security, compliance, audit, quality, EH&S, sustainability – all have their respective islands of standards. This makes putting a GRC strategy in place that bridges these silos difficult as the language, implementations, and approaches are quite different. In fact – organizations trying to get an enterprise view of risk and compliance desperately search for a GRC “Rosetta Stone.”

There is only one framework that I see that brings this universe of GRC into a common language, process, and architecture – that is the OCEG Red Book (v2) and its GRC Capability Model™. Although various standards and guidance frameworks exist to address discrete portions of governance, risk management and compliance issues, the OCEG GRC Capability Model™ is the only one that provides comprehensive and detailed practices for an integrated and collaborative approach to GRC. These practices address the many elements that make up a complete GRC business architecture. Applying the elements of the GRC Capability Model™ and the practices within them enable an organization to:

Achieve business objectives
Enhance organizational culture
Increase stakeholder confidence
Prepare and protect the organization
Prevent, detect and reduce adversity
Motivate and inspire desired conduct
Improve responsiveness and efficiency
Optimize economic and social value

The GRC Capability Model™ describes key elements of an effective GRC architecture that integrate the principles of good corporate governance, risk management, compliance, ethics and internal control. It provides a comprehensive guide for anyone implementing and managing a GRC system or some aspect of that system. The OCEG GRC Capability Model™ is broken into eight components:

CULTURE & CONTEXT. Understand the current culture and the internal and external business contexts in which the organization operates, so that the GRC system can address current realities – and identify opportunities to affect the context to be more congruent with desired organizational outcomes.
ORGANIZE & OVERSEE. Organize and oversee the GRC system so that it is integrated with and when appropriate modifies, the existing operating model of the business and assign to management specific responsibility, decision-making authority, and accountability to achieve system goals.
ASSESS & ALIGN. Asses risks and optimize the organizational risk profile with a portfolio of initiatives, tactics, and activities.
PREVENT & PROMOTE. Promote and motivate desirable conduct, and prevent undesirable events and activities, using a mix of controls and incentives.
DETECT & DISCERN. Detect actual and potential undesirable conduct, events, GRC system weaknesses, and stakeholder concerns using a broad network of information gathering and analysis techniques.
RESPOND & RESOLVE. Respond to and recover from noncompliance and unethical conduct events, or GRC system failures, so that the organization resolves each immediate issue and prevent or resolve similar issues more effectively and efficiently in the future.
MONITOR & MEASURE. Monitor, measure and modify the GRC system on a periodic and ongoing basis to ensure it contributes to business objectives while being effective, efficient and responsive to the changing environment.
INFORM & INTEGRATE. Capture, document and manage GRC information so that it efficiently and accurately flows up, down and across the extended enterprise, and to external stakeholders.

OCEG’s GRC Capability Model™ is, in my opinion, the best umbrella framework to bring a holistic enterprise view of GRC together that works from the board of directors down into the management and process of an organization. Its goal is not to replace other frameworks and standards but to give them a common language and context to operate within and thus provide enterprise collaboration and communication across governance, risk, and compliance.

Source: Michel Rassmusen, 22.07.2009


Filed under: Library, News, Risk Management, Standards, , , , ,

New Views on the Hedge Fund Industry – State Street Study June 2009

The global financial crisis is bringing about an evolution in hedge funds that will render  significant changes to the industry. Record investment losses and investor withdrawals  have cut assets under management by more than one-quarter, consolidation is under  way, and both investors and regulators are calling for greater transparency.

Download: Hedge Fund Study – State Street -June 2009

Two major trends that will have far-reaching impacts are emerging: a migration among the maturing hedge fund industry to third-party administration, custody and specialized services, and the most comprehensive reconsideration of financial regulations in a generation.

According to State Street’s annual hedge fund study conducted in October 2008, 84 percent of institutional investors surveyed expect more frequent disclosure of  hedge fund positions, while 49 percent anticipate more frequent reporting.
Before the dust from the crisis settles, it will be important for all of the stakeholders in this market to understand the ramifications of these trends and to participate in shaping the new structure of this changing industry.
Though forever altered by current market conditions, hedge funds will retain their critical and proven role in institutional investors’ financial portfolios.

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London Mayor: Hedge Fund might leave London for Singapore, SGP Hedge Fund, 09,07,2009

London Mayor Boris Johnson attacks EU’s plans to regulate hedge funds, FT 08.07.2009

Source: State Street, June 2009

Filed under: Asia, Library, News, Risk Management, Services, Wealth Management, , , , , , , , ,

GRC Governance, Risk and Compliance Management: How valuable are Analyst reports?

Analyst firms provide value as well as harm to markets. What they define, model, and predict affects billions of dollars and influences the course of organizations of all sizes and industries. I’ve had a unique perspective on this during my nine years in the market research and analyst world and for seventeen years of professional life.

I have particular frustration with the major analyst firms (such as Gartner and Forrester) when it comes to governance, risk, and compliance (GRC) issues. This is particularly meaningful viewed through the lens of my seven years at Forrester Research, Inc. where I was a vice president, and was recognized as a ”Top Analyst” the day before I resigned. I was the original analyst to define and model a market for GRC technology and consulting services.

Today’s release of The Forrester Wave™: Enterprise Governance, Risk, And Compliance Platforms, Q3 2009 made me throw my hands up in despair. I can see one organization after another making bad technology choices, based on where a vendor’s icon falls on an analyst’s graphic. My experience with this speaks for itself – I authored four Waves in my tenure at Forrester, two of them being the predecessor to this third-generation GRC Wave.

Before I get too critical, some positive thoughts: The Forrester Wave process is stronger than Gartner’s Magic Quadrant. The criteria for evaluation and measurement are much more transparent. I never had a vendor tell me they prefer Gartner’s process. I also have deep respect for Chris McClean, the author of the current GRC Wave. Chris and I have known each other for years. I trained Chris on GRC on his entry into Forrester, and my transition from Forrester went smoothly because we are like-minded. Chris is a respected thought leader on business GRC issues and solutions, particularly when it relates to Corporate Social Responsibility. However, Chris’ handicap, like mine was, is Forrester itself.

Further, several of the vendors in the Wave deserve their placement. I have respect and agreement for the leadership position of BWise, OpenPages, and Thomson Reuters. Axentis has the best policy management solution on the market, and a competitive investigations platform – though their high placement baffles me, as they do not come close to the others on deeper risk and audit management capabilities. However, MetricStream does surprise me in their leader position.

The current version of the GRC Wave concerns me because:

  • It is out-of-date the day it is published. This particular Wave process took six months. Several of the platforms evaluated have new and improved versions on the market, some of which have been available for several months. The Wave process takes much too long to be relevant to buyers.
  • The Wave criteria have not evolved. The GRC market and technology changes rapidly. There was a significant difference in criteria between the first GRC Wave and the second, which I authored while at Forrester. This time, however, the criteria remain nearly identical to what I authored on the last Wave, despite how dynamic the market and technology have been during the last 18 months. In this new Wave, several vendors were hurt on their positions because they are moving beyond the box assigned to them by the Wave criteria. In the second Wave, I broke the Wave into four graphics to represent different areas of GRC – with vendors plotting differently, based on buyer needs. This latest GRC Wave should have expanded, not eliminated that feature. The Wave should have broken into several independent Waves to measure specific buyer roles of GRC solutions such as risk, audit, IT, finance, corporate compliance, and legal.
  • It reaches the wrong audience. It is interesting to note that some vendors in previous GRC Waves are not in the current one – even when they scored high in the previous Wave. Why did they not participate? For a few it was because the Wave takes a tremendous amount of time and resources and reaches the wrong buyer. Companies like Compliance 360 and Mitratech are doing well reaching buyers who are not in IT, where Forrester is focused. In fact, some vendors report that reference to the previous Wave(s) did not come up with prospects and clients. This is one of two reasons why I left Forrester: They fail to reach the business buyer of GRC. Forrester is successful at reaching the IT-GRC buyer focused on IT risk and compliance issues, and to some degree the finance buyer. However, Forrester fails to get its research in front of enterprise buyers focused on risk, corporate compliance, legal, audit, quality, environmental, health and safety, and corporate social responsibility (which is Chris’ sweet spot).
  • It misses major GRC vendors. It is alarming that the current Wave misses significant GRC vendors such as Oracle and CA, as well as smaller players such as Neohapsis (formerly Certus). Some declined because of bad timing; others, if I understand it correctly, were simply not invited. Oracle and CA are coming up regularly in competitive GRC deals – more so than several of the small and poorly performing players in the Contender and Strong Performer categories. Even if a vendor refuses to participate, Forrester still has a process to plot a vendor and note that they did not willingly participate in the Wave.

This is bad news for a GRC buyer. While it gives them some perspective of players in the GRC market, the perspective is out-of-date and incomplete. Specifically, beside the vendors that do not appear in the Wave, I feel the following are poorly represented: read full article by Michael Rasmussen, J.D.

Source: Corporate Integrity, 02.07.2009

Filed under: Data Management, News, Risk Management, , , , ,