Business Entity Data · Business entity data has been in the limelight ever since the fall of Lehman. While few data management projects secured funding this year, business entity

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A Concept without Funding? Business entity data has been in the limelight ever since the fall of Lehman. While few data management projects secured funding this year, business entity data initiatives have still remained on the agenda. In fact, at Inside Reference Data’s European Financial Information Summit in London, almost 50% of data consumers said current programs are expected to significantly improve counterparty data

management this year or next year.Although few said the initiatives had board-level sponsorship, the understanding of

data management is rapidly improving. In a poll at the event, participants were asked about the meaning of pro-active data management, and close to 80% recognized that pro-active data management constitutes everything from having a data management policy to having the ability to reflect real-time changes in the data. It is now all about converting this understanding, which many claim has percolated up to senior manage-ment, to real funding for projects.

As 33% still say they do not expect any significant improvement of counterparty data management in the near future, it is obvious a large number of firms are yet to wake up to the reality of the work required to collect and maintain data on clients and entities.

In this 2009 Business Entity Data Special Report, which includes comments from industry experts and a news review, we hope to provide readers with an insight into the latest developments in the enterprise data management world. And if you find this interesting, we also hope you will want to join us for the Inside Reference Data Integrated Data Management web cast on Wednesday, October 14.

Yours sincerely,

Tine ThoresenEditor, Inside Reference DataEmail: [email protected]: +44 (0)20 7004 7470

Editor’s Letter

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NEWS� Anna Prepares Implementation Plan to Take on Registration Authority Role for Short Names and IGI

� Collaboration and Standardization Work to Benefi t Counterparty Data Industry

� Data Handling and Manipulation Tool Implementation Pays Off for Citi

� News Download

FEATURES� Virtual Roundtable Inside Reference Data gathers leading industry professionals to discuss the importance of putting in suffi cient resources to manage counterparty data and mitigate risk

Sponsor’s Statement20 Interactive Data

22 Q&A Inside Reference Data speaks to Adam Honore, research director at Aite Group, about the latest developments in the counterparty data space

Contents

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LONDON—The Association of National Numbering Agencies (Anna), the regis-tration authority for the ISIN and CIF standards, is considering taking on the registration authority role for three addi-tional standards, and is developing an implementation plan due in November, offi-cials tell Inside Reference Data.

At an Anna meeting in June, the board said the group should assume a more active role in the registration of the standards for financial instrument issuer names, ISO 18773, and financial instrument short names, ISO 18774.

At the same time, the ISO Working Group 8 (WG8), which is in the final stages

of creating the issuer and guarantor iden-tifier (IGI), has also approached Anna for the registration authority role. “It is being proposed that the country numbering prefix in the IGI is the same as in the ISIN, and Task Force 20 has expanded the imple-mentation plan scope to also assess imple-mentation of the IGI as there will be many synergies with the other two new stan-dards,” says London-based Anna chairman Dan Kuhnel, adding that the ISIN licensing debate is now in the hands of the European Commission.

The full version of this story appeared in Inside Reference Data, September 2009.

Tine Thoresen

� October 2009 www.irdonline.com

News Review

Anna Prepares Implementation Plan to Take on Registration Authority Role for Short Names and IGI

LONDON—Several data vendors in the counterparty data space are working on new offerings set to revolutionize the indus-try after listening to users such as Julia Sutton, who has been encouraging vendors to collaborate and provide easy access to data to help increase efficiency.

London-based Sutton, now former global head of customer accounts at Citi, is a big supporter of open source, and taking an interactive approach to data management. Counterparty data vendor Avox is the first

to announce plans to offer this service. “Avox’s main strength is that they listen to industry professionals,” says Sutton.

So far, the vendor has made 200,000 ‘skinny’ counterparty data records freely available via a website—www.wiki-data.com. The free data fields include legal name, country of operation, country of registration and the Avox identification number.

The full version of this story appeared in Inside Reference Data, July 2009.

Tine Thoresen

Collaboration and Standardization Work to Benefit Counterparty Data Industry



News Download

LONDON—Operations groups within Citi have benefited from increased automation and improved data standardization around its custom-er data after going live with a reconciliation hub from software vendor Web Services Integration (WSI), officials tell Inside Reference Data.

Citi implemented the Xceptor Product Suite Reconciliation Hub in 2008 and has in the past three months started using it to its full advantage. The data handling and manipulation product takes data from various sources, validates and enriches it, allows users to configure matching and reconciliation rules, and provides data in a standardized format to improve integration and straight-through processing.

The implementation has given Citi greater control over its data and increased the time avail-able for data analysis by automating its retrieval. The product has enabled the firm to handle various vendor feeds and efficiently compare data. It has helped with regulatory compliance by adding controls around data remediation efforts for Basel II.

London-based Julia Sutton, former global head of customer accounts at Citi, says using the WSI tool and its front-end flexibility has enabled her team to make the data look more professional, giving people something they can look at and query straight away. “It’s allowed us to have more control over our data and we are getting some positive feedback from those using it,” she says.

The full version of this story appeared in Inside Reference Data, June 2009.

Carla Mangado

Cusip Teams Up with Avox for Business Entities Counterparty data vendor Avox and Cusip Global Services have partnered to create a business entity identifica-tion system—Cusip Avox Business Reference Entity Identifier (Cabre). The new code, which has 10 charac-ters, will cover issuers, obligors and counterparties on a global basis and will be made available immediately to Avox and S&P/Cusip customers.

The structure will also be distrib-uted via portfolio, bulk-file and web-based applications, and there will be a directory containing Cabre’s and basic data for more than 250,000 entities.

Counterparty Data Governance Key to Reduce RiskFirms need to introduce counterparty data governance and processes to reduce counterparty risk and prepare for future crises, according to speak-ers at the North American Financial Information Summit in New York in May. Panelists said firms first need to put in place governance and process-es to ensure good counterparty data, then introduce good descriptions of incoming data.

One speaker had seen a bank having 7,000 categories of instruments in 14 different silos. It then becomes a governance issue and a case of under-standing the infrastructure.

Data Handling and Manipulation Tool Implementation Pays Off for Citi


In what ways can firms best aggregate counterparty data to help manage exposure levels?David Goldberg, managing director, BNY Mellon client data management: Banks need full legal entity hierarchies for their major client relationships and a mech-anism to keep them up to date on a daily basis, as the financial landscape is changing rapidly in today’s environment.

Robin Simpson, managing direc-tor, reference data, Interactive Data: I believe this is a wider issue than just aggregating counterparty data, and that maintaining an accurate and consis-tent view of entity data available across the organization is key to managing counterparty risk exposure. Firms need to bring together the disparate data sources they hold on companies, issuers and under-

lying issues to create a shared single view of counterparty data and associated risks across the organization.

Tony Brownlee, principal, Kingland Systems Corporation: Data aggrega-tion, especially when it comes to business entity or counterparty data within large organizations, is all about process. There are many different business rules and best practises that we at Kingland have found over the years are required to accurately manage business entity data, and that’s the goal—accuracy. Accurate counterparty data forms the foundation to monitor expo-sure levels, but requires effective processes to work with the appropriate members of the risk teams—process to aggregate the data; process to proactively monitor risk; and process to reactively support risk, all of which require accurate data.

Business Entity Data: Entities in FocusInside Reference Data gathers leading industry professionals to discuss the importance of putting in sufficient resources to manage counterparty data and mitigate risk

Virtual Roundtable

� October 2009 www.irdonline.com


Ed Ventura, independent consultant, and former senior product manager, market data, SEI Investments: In my experience, the most important step in managing exposure related to counterparty data is to take a holistic view of data across the enterprise and to centralize the data when feasible. Recently, I was asked to help out the risk management unit of a major firm and discovered that they maintained counterparty and reference data within each of their verticals, with no indication of whether they were holding the same securi-ties and/or for related securities.

The correlation between the assets was not indicated within the verticals and the risk unit had the task of assessing the impact to the enterprise. Imagine going through each security master daily and trying to assess exposure across the enter-prise with high levels of trading activity; by the time you identify a concern, it may have either grown or been traded away. Several options are now being evaluated to facilitate this, including a single database for all the verticals to draw upon and/or the establish-ment of a code that will correlate assets to present a single view of the risk.

Matthew Bastian, director, prod-uct development, Standard & Poor’s Securities Classifications: It all starts with quality data, as the ability to uniquely identify a counterparty is the first build-ing block of an effective framework for exposure management. With that in place, the hard part is creating and maintaining a

hierarchy, or family tree, illustrating where each entity falls within a global corpo-rate structure. Those relationships can be complex and, at times, counter-intuitive (for example, Bear Stearns, at the time of its collapse, owned more than 50% of the Vitamin Shoppe). We have found that many firms are devoting manual resources to this painstaking task, often with mixed results. Not to pick on Lehman Brothers, but the next time that happens you don’t want to be scrambling that morning to piece together


Robin Simpson, managing director, reference data, Interactive DataTel: + 1 781 687 8476www.interactivedata.com

“Firms need to bring together the disparate data sources they hold on companies,

issuers and underlying issues to create a shared single view

of counterparty data and associated risks across the

organization” Robin Simpson, Interactive Data


all your potential exposures to the troubled fi rm, which may be an umbrella concern covering scores of entities and tens of thou-sands of fi nancial instruments. To help prevent these sorts of fi re drills, Standard & Poor’s has worked with a number of clients throughout the credit crunch to provide data solutions geared towards exposure management.

Brian Filanowski, global business manager, pricing and reference data, EMEA, Thomson Reuters: For fi rms to get a clear picture of their global exposures, counterparty data needs to be a core pillar in a centralized data manage-ment strategy. The infamous Lehman case highlighted defi ciencies in many fi rms’ data strategy as they struggled to get a view of not only global exposure levels but even a basic view of holdings across all Lehman-owned entities. At the crux of the problem was that the link between counterparty data and secu-rity master data was either missing or

incomplete. In today’s environment, it is crucial to get this linkage right. Counterparty data cannot continue to be managed in isolation.

Counterparty risk is seen as a number-one priority for the majority of fi rms, but are processes in place for managing this type of risk? What more needs to be done?Goldberg: I believe all major fi nancial insti-tutions have processes in place to manage counterparty risk. It’s really more of an issue of how effective are the processes, how diffi cult is it to collect and collate data, and what is the integrity of the information being reported.

Simpson: Many companies take a func-tion-specifi c approach when measuring their exposure to counterparty risk. I believe a siloed approach makes it diffi cult to identify exposures across the organiza-tion and that an enterprise-wide, holistic approach to managing counterparty risk is needed. A key to reducing systematic risk where a number of parties are involved, such as with derivatives, is to ensure the data covering all the parties is granular, timely and shared throughout the organization. Manual data collection processes built to support specifi c business functions can often result in inconsistency and duplication.

Brownlee: Some processes may be in place, but they are likely to be departmen-

Virtual Roundtable

10 October 2009 www.irdonline.com

Tony Brownlee, principal,Kingland Systems CorporationTel: +1 641 355 1088www.kingland.com


tal. The other big issue facing many firms is the limited number of resources avail-able to effectively execute these processes. Firms serious about business entity data and counterparty risk are taking the first step towards success by gaining executive-level sponsorship and support from critical divisions. These issues are complicated and require organizational alignment to be well executed and provide an enterprise view.

Ventura: I sense counterparty risk has moved to the top, or at least near the top, of the list, and that’s a good thing. It’s unfor-tunate that it stayed on the back burner for so long. If better handled several years ago, it would have eased the recent melt-downs. Firms are beginning to understand the impact of the relationships among assets on their books now. From what I’m seeing, most of the processes are manually handled with few automation options, none of which seem to be all-encompassing. Additional education about counterparty data, better organization of databases, holistic views of the enterprise and availability of additional data elements will all lead to better management of this type of risk.

Bastian: Again, our experience at Standard & Poor’s has been that most, if not all, firms have some process in place to deal with counterparty risk. The $64 million question, of course, is the overall effectiveness and reliability of those processes and systems. Whether a firm opts for an in-house solution

or partners with a vendor, proper identifica-tion of each counterparty record is a crucial underpinning, as is a regular cleansing of the data. Some firms have a good handle on this, while others struggle, but there is almost always room for improvement. The quest for a universal counterparty identification system, which has gained new life and traction with the Issuer and Guarantor Identifier (IGI) initiative should go a long way towards standardizing counterparty data across firms. For an industry that tends to be wary of new stan-dards, the IGI seems to be one whose time has come.

Filanowski: Historically, many risk, and compliance, processes were an “after-thought” to the trade process. While the trades were executed in the front office, the risk and compliance teams sitting in the middle office would scramble to conduct their due diligence on the counterparties and run risk analysis, all after the fact. In many cases, risk and compliance depart-


“Firms that are serious about business entity data and

counterparty risk are taking the first step towards success

by gaining executive level sponsorship and support from

critical divisions”Tony Brownlee, Kingland Systems


ments were so siloe’d that they would have data infrastructures completely sepa-rate from the rest of the organization. Firms need to adopt an enterprise data management strategy that breaks the silo mentality and integrates each business function as a critical component to the overall trade lifecycle.

Market participants expect to see more regulation affecting counterparty data management. What should fi rms do now to prepare? Or is it best to sit back and wait for regulatory action? Goldberg: Now is an excellent time for fi rms to invest in infrastructure improve-ments, new technology solutions and

enhanced processing capabilities to manage counterparty data to build a dynamic counterparty risk management environment.

Simpson: I believe that for a company to get a true feel of their counterparty risk exposure, it is essential that relevant data is collated and shared across the enterprise for risk reporting. Firms need to establish a centralized view to ensure consistency of their data and support the in-house distri-bution required across individual business functions. For example, having accurate and consistent data loses value if it cannot be made available to the trading desk in a timely fashion.

One action fi rms can take in advance of any regulatory change is to scrub their clients’ records. This is at the core of a fi rm’s securities operations. We at Interactive Data offer specialist counterparty reference data alongside our broad range of security-level refer-ence data. Our Business Entity Service establishes relationships between issues, issuers and parent entities, and maps them directly to the client’s fi le of securi-ties on a daily basis.

The current approach to the manage-ment of liquidity risk and introduction of enterprise-wide stress testing will prob-ably be a major driver in determining the scope and frequency of risk reporting. And bringing instrument data together with counterparty data to facilitate risk analysis is the immediate fi rst step. This then needs

Virtual Roundtable


Scott Preiss, vice-president(Tel: +1 212 438 6560), andMatthew Bastian, director,product development,(Tel: +1 212 438 4072),Standard & Poor’s SecuritiesClassifi cationswww.standardandpoors.com


to be closely followed by scenario analysis that permits ‘what-if’ type scenarios to be executed to predict the results.

Brownlee: As I’ve said before, busi-ness entity data is really foundational. Counterparty data management is only part of the picture, and evolving regulations are likely to include counterparty data, but will expand beyond. Firms can start preparing by taking two actions. First, evaluate the quality of enterprise business entity data and other key types of enterprise data. Can the firm rely on it? Is it accurate? Second, evaluate the resources, namely people and technology, in place to support the current and future data needs of the organization. Does the technology (for example, master data management) support centralized use by the organization? Are people and tech-nology processes supporting or inhibiting the quality goals?

Ventura: Lobby, lobby and lobby to make certain the regulators do not put us in the position of having to report on the trees and lose sight of the forest. When we see companies trading esoteric securi-ties and barely understanding them, how can we expect regulators to create rules that will be meaningful? If new regula-tions are focused on the issuing side, the industry stands a chance of regulat-ing risk; however, that will most likely limit opportunity. I think the best way to prepare is for a company to get to know and understand its data, organize it in a

meaningful manner and make certain it has an enterprise view.

Scott Preiss, vice-president, Standard & Poor’s Securities Classifications: It is clear market participants are seeing strong regulatory impact across their busi-nesses, are correct in anticipating more of the same, and counterparty data manage-ment is certainly no exception. It is safe to assume old models of understanding and managing data related to issuers, obligors, legal entities and counterparties will not be tolerated—not in terms of understand-ing relationships among these parties, nor in terms of the timeliness required to piece this information together. Whether the next market event impacts a single organization or an entire industry sector, the time to understand with precision and granularity the associated linkages and risk profile is not after the event, but before it. It is still rather shocking to observe how many firms scrambled for weeks after the


“It is safe to assume old models of understanding

and managing data related to issuers, obligors, legal

entities and counterparties will not be tolerated”Scott Preiss, Standard & Poor’s


Lehman and AIG announcements to get their arms around this information. Sitting on the sideline and seeing which way the regulatory winds are blowing is not a viable option.

Filanowski: In the past, there have been varying levels of crises that have forced fi rms to rethink the way they do business. The problem has not been due to lack of

ideas to solve these issues, it has been in the execution of ideas. Crises slowly fade away, priorities change and the pain is forgotten. The difference this time is that the industry cannot withstand another cata-strophic event on such a global scale. Right now, it’s all about transparency; transpar-ency of valuation models, exposure levels, risk management processes, end-to-end workfl ows, etc. To achieve such transpar-ency, data management strategies need to change from being a buzzword to being implemented. Focus needs to be put on these projects at the most senior levels and tracked through to completion. Waiting for regulatory action is a dangerous game and is just another excuse for not focusing on data management.

How viable is it for a commercial entity to enter the business entity identifi er space? Goldberg: It is quite viable and there are a number of commercial entities with excellent business identifi er capabilities. I suspect one will emerge, over the long term, as the de facto industry standard.

Simpson: In the absence of the adoption of a global identifi cation standard, unique identifi cation of entities (counterparties, issuers and guarantors) continues to be an issue for the industry. Today, many fi rms have to act as aggregators of entity data, cross referencing data from different sources and allocating their own proprietary identi-fi ers to manage the process.

Virtual Roundtable


Brian Filanowski,global business manager, pricing & reference data, EMEA, Thomson ReutersTel: +44 207 542 0870 www.thomsonreuters.com

“Crises slowly fade away, priorities change and the pain is forgotten. The difference this time is that the industry cannot withstand another catastrophic event on such a global scale”

Brian Filanowski, Thomson Reuters


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As such, it is viable for vendors to propose business entity identi-fier solutions to the industry, but the effort to attain full coverage—combined with the ongoing maintenance burden—is very signifi-cant and commercial entities will typically be seeking a return on such

endeavors. I believe charging structures and usage rights would be key determi-nants of the adoption rate, and unless the identifier schema attained critical mass, then the industry problem would not have been addressed.

Brownlee: Viability isn’t the question. There are a number of commercial enti-ties in the business entity identifier space today. Long-standing vendors such as Equifax and D&B can identify millions of businesses with their identifiers. At Kingland, we uniquely identify approxi-mately 900,000 business entities specifi-cally relevant to the financial services industry by using our KINSTM number. Identification isn’t the hardest part. The complex part is maintaining accurate and reliable business entity data that is relevant and actionable for large enter-prises. Identification within these large enterprises means integrating accurate business entity data with legacy systems and existing business processes that, for

the most part, work and aren’t going to change.

Ventura: Who would have thought you can sell tap water in a bottle, or a pet rock? I think there are some commercial enter-prises burning the midnight oil trying to do just that, as we speak, and I think it would have great commercial value. Anything that is centered around identifi-cation standards of some sort within this space will be a help.

Preiss: This question raises the classic issue of global standards development and a time-honored consensus process versus the commercial profit motive. This remains an extremely delicate balance, and one that is drawing more scrutiny than ever before. I believe history has demonstrated a blend of the two works best: a standards/consen-sus approach in the development phase to ensure the critical requirements of the market are being met. Execution, however, is a function of expertise, laser focus, and sustained investment and execution—and this is precisely where commercial entities tend to excel. This is exactly how I see the business entity identification space evolv-ing right now: requirements being solidi-fied by standards working groups, and commercial entities aligning to execute on those requirements.

The viability of this initiative for commer-cial entities will be decided by market demand—which I believe to be strong—and how many commercial entities are

Virtual Roundtable

1� October 2009 www.irdonline.com

Ed Ventura, independent consultant


truly committed to this endeavor. This scenario is being played out in real time before our eyes.

Filanowski: To answer this question, let’s look at the security identification space. Today, there are more than 70 different national numbering agencies across the globe, each with their own way of identify-ing an instrument. This doesn’t take into account derivatives, bespoke structured finance deals, etc.

Many firms involved in cross-border trading have to maintain complex mapping tools to process, clear and settle a single trade. The same is starting to happen in the entity identifier space. At the moment there are more than a dozen firms providing entity data, each with their own unique iden-tifier in the hope it will eventually become the standard.

One of the ways a commercial entity can get traction in this space is to provide not only an entity identifier but provide the linkage from the entity, to the asset, down to the individual pricing sources and across all the supporting data sets such as corpo-rate actions, fundamental data, etc. This will allow firms to integrate a complete data solution rather then spending valuable resources mapping identifiers across dispa-rate data sources.

What difference would a unique entity identifier make? Is the user community interested in adopting yet another standard?

Goldberg: I think a fully adopted universal entity identifier would make a major differ-ence for all financial firms that struggle with exactly the same issues and spend considerable time and money trying to resolve them. I do believe the user commu-

nity would embrace a universal entity iden-tifier if it is truly universal, it’s implemented in a way that is both practical and easily available and not cost-prohibitive to utilize.

Simpson: The short answer is probably yes, provided that the standard proves to be the solution to the problem.

Many benefits spring to mind, but the main difficulty with a unique entity iden-tifier is in the execution. To be successful, the identifier would have to meet a broad set of needs, and it would therefore most


David Goldberg, BNY Mellon

“I think a fully adopted universal entity identifier

would make a major difference for all financial firms that

struggle with exactly the same issues and spend considerable

time and money trying to resolve them”

David Goldberg, BNY Mellon


1� October 2009 www.irdonline.com

likely require very broad coverage—and be both reliable and timely. The identifier would also need to be highly available, which would necessitate access and usage at an acceptable price point.

Beyond these considerations, it is impor-tant to recognize that take-up might be slow due to the implementation challenges users would face. Experience suggests that in the absence of a regulatory mandate, most participants will wait to see if the identifier gains critical mass before implementing, undermining both the goal and the speed at which it might be attained.

Although industry efforts to achieve a unique entity identifier have been unsuc-cessful to date, there is a recognized need for such an identifier on a global basis. Recent activity by industry bodies such as WG8 in redefining the IBEI as the IGI, as well as interest on behalf of regula-tors, central banks, Swift and ISO, have continued to keep this issue firmly on the industry agenda.

In the absence of a unique entity iden-tifier, Interactive Data has aligned itself with the major specialist counterparty data providers to offer a Business Entity Service that combines its own broad range of security-level reference data.

Brownlee: For the user community to truly adopt a universal standard for entity identification, the business drivers will need to emerge. Regulation may help. The continued proliferation of complex global

business may help. The current efforts throughout the industry may move the needle a bit, but a true unique entity iden-tifier will emerge from a cross-industry effort, beyond a pure banking or capital markets focus. Technology and even stan-dards always find a way of addressing the needs of the market.

Ventura: When faced with new regula-tions, high risk and paper losses versus a new indicator, I’ll go with a new indica-tor anytime. What I’ve seen in one firm I’ve recently helped in this space was the creation of an internal indicator to draw relationships among securities. If they’re taking that approach, then others are taking that approach. And that means the industry will end up with different ways of tracking the same risk and rela-tionships. Eventually, some industry organization will pull everyone together and create a standard that will require everyone to change what they’re now independently building; some enterprise will commercialize it; we’ll all have to buy licenses; the commercial enterprise will prohibit us from carrying it on our files and we’ll develop another internal number to cross-reference with the identi-fier—but at least we’ll be managing our risk appropriately.

Preiss: I have no doubt that a single, global unique entity identifier would have a significant long-term impact on market participants. If we can park the discus-

Virtual Roundtable


sion and rhetoric around the “how” and the “who” for a moment, the notion of a common language to facilitate commu-nication and market efficiency should be broadly accepted. The market tends to take for granted the monumental strides taken in this regard in other areas, such as unique instrument identification and standardization of country and currency coding structures. Without standardized instrument identifiers, chaos would be the order of the day; the volumes, transaction speed, clearance, settlement and reporting that takes place every day is predicated on a common language. The same should be expected on an entity and counterparty level in today’s complex markets. The current “Tower of Babel” approach, wherein systems and institutions cannot speak to each other in a common language cannot be sustained. What rational user would not want to reduce risk and embrace a solution?

To that end, Cusip Global Services is proud of our recent alliance with Avox/Deutsche Borse to provide a reliable, common entity identifier on a global basis. This effort, known as “Cabre” (Cusip Avox Business Reference Entity identifier), has been developed to provide an immediate solution to the myriad market participants who demand an immediate solution, yet has been constructed with long-term stan-dardization in mind. From both a format and a flexibility perspective, the Cabre has been designed to allow integration into any future global standard, such as the

IGI (“Issuer and Guarantor”) effort, if and when appropriate.

Filanowski: Over the years, there have been lots of discussions on establishing a unique, “standard,” entity identifier. There have also been lots of discussions on estab-lishing a unique, “standard,” security identi-fier. Some view this as being the panacea to all their data management issues. While this may be nirvana, the main problem is that to implement such a standard would require a change in every point along the data supply chain. Every one of the thousands of data sources would have to agree on using a single identifier and standard template for collecting, tagging and distributing data. At the same time, every data aggregator would also have to agree on using a standard set of rules for collecting, processing, maintaining and distributing data. Although as a hypo-thetical exercise this all looks feasible, the reality of completely overhauling the data supply chain is a different matter.


“Although industry efforts to achieve a unique entity

identifier have been unsuccessful to date, there is a recognized need for such an identifier on a global basis”

Robin Simpson, Interactive Data



Sponsor’s Statement

The Vital Role of Business Entity Data: What is My True Exposure?Some firms may have taken weeks, months or even years to figure out the true size of their exposure to an entity that has collapsed. The sheer complexity of deal-ings and ownership issues can make it diffi-cult for auditors to peel back the layers and get the full facts of the situation. Firms that have gone through the five stages of grief find that acceptance can lead to growth. And when it comes to understanding risk and identifying exposure to entities, accep-tance of high-quality business entity infor-mation as a critical component in measuring a firm’s risk versus reward balance can become a business enabler.

Business entity data is now receiving much more attention. Recent market turmoil, new and anticipated regulations and increased focus on managing risk have highlighted the need for full disclosure of the details behind counterparties, issuing entities and their instrument issuance. Across the industry, managers are looking to meet their require-ments under regulations and directives such as Basel II, UCITS, Mifid, Sarbanes-Oxley and the US Patriot Act, as well as the current approach to liquidity risk management.

High-quality, continuously available data is essential to a firm’s ability to gain operational efficiencies, meet compliance requirements, enhance customer service and mitigate risk. However, the process of keeping business entity data current and

consistent across the organization can be an enormous challenge.

Much of a firm’s business entity data is still kept in individual business silos for use by, for example, internal credit, risk and settlement systems. Challenges to acquiring and maintaining up-to-date entity data include disparate sources, a lack of standards and the manual collection of the data. In many organizations, entity data and securities data have been maintained separately; this can necessitate a costly and time-consuming manual mapping process to identify global exposure to various enti-ties, industries and regions.

Understanding entity interrelationships is fundamental to the process. Firms need the ability to map their holdings back to the relevant hierarchy in order to iden-tify exposures through parent-subsidiary relationships. A solvent entity can quickly be brought down by an insolvent parent. Therefore, maintaining a consistent view of entity data available across the organi-zation is key to managing counterparty risk exposure. Disparate data sources held on counterparties, issuers and client views need to be brought together in order to create a single view of counterparty data shared throughout the organization.

But firms are starting to understand the mission-critical connection between central data management strategies and business



entity data management, and are integrating their issuer-to-issuer links into the securities master, where they can be used for trading analysis and risk assessment.

Interactive Data has been monitoring changing industry needs and has teamed up with three leading specialist counterparty data providers to offer a Business Entity Service that combines its own broad range of security-level reference data. The service establishes relationships between issues, issuers and parent entities, and maps them directly to a client’s securities of interest on a daily basis. By identifying a firm’s global exposure to a specific entity, industry or region, the service can help clients to obtain a more complete picture of the corporate hierarchy of an entity in order to better understand its capital structure and region-based risk exposure, as well as perform pre- and post-trade analysis.

Interactive Data’s Business Entity Service can also help identify the potential risks that could be triggered by corporate events

affecting related entities from anywhere within the ‘family tree’ of the subject entity. In addition, the service can help clients to comply with internal or client-imposed restrictions on exposure to an entity.

The need for high-quality business entity data is clearly beginning to be accepted by the industry as vital. The rewards for investment are thought to be significant as the consequences of not understanding your exposure can be very high. Portfolio concentration risk, counterparty and credit risk, operational and reputational risks, as well as settlement, financial, legal and other regulatory issues, are all at stake if a firm fails to efficiently manage its entity data.

This article is provided for information purposes only. Nothing herein should be construed as legal or other professional

advice or be relied upon as such

Robin Simpson is managing director, reference data, Interactive Data

www.interactivedata.com.

The Vital Role of Business Entity Data: What is My True Exposure?

About Interactive Data CorporationInteractive Data Corporation (NYSE: IDC) is a leading global provider of financial market data, analytics and related solutions to financial institutions, active traders and individual investors. The company’s businesses supply real-time market data, time-sensitive pricing, evaluations and reference data for millions of securities traded around the world, including hard-to-value instruments.



Will the focus on business entity data continue in coming years or has this year been an exception? I think you will see entity data form the nucleus of a real-time risk management strategy. Firms that plan to track news, events, legal findings, customer sentiment and a myriad other pieces of moving infor-mation for soft risk assessments, will need to ensure entities are accurate or the risk models will be useless.

Is the increased focus reflected in budgets?Data efforts are almost never actually reflect-ed in budgets, but some firms have seen the light. Others are folding this into account set-up projects, risk projects, or others to apply some cross-functional effort.

What lessons have been learnt? I don’t think we’re done learning lessons yet, but to some degree the more public incidents have caused some internal ques-tions to be asked around whether firms

could have known sooner and what, if anything, they can do to identify exposure earlier next time.

How common is it now to validate business entity data against data from a third party source? At the larger firms, it has almost become the norm. At smaller firms and firms in emerg-ing markets, not so much.

What’s next for the vendors in this space? Data correlation. It’s going to be all about value-added information. What can I tie my entities with that helps my clients? Many of the providers have other divisions supply-ing content that can improve risk. Thomson Reuters has Findlaw, news, indexes, etc. Deutsche Borse and Bloomberg also have news. D&B has extraneous entity infor-mation and access to executive structures. Tying those value-adds throughout other parts of the information supply chain is what will begin to differentiate the vendors.

Q&A

Still Learning

Adam Honore

Inside Reference Data speaks to Adam Honore, research director at Aite Group, about the latest developments in the counterparty data space


Analytic services and products provided by Standard & Poor’s are the result of separate activities designed to preserve the independence and objectivity of each analytic process.Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process.

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Standard & Poor’sCross Reference Services™

helped my firm gain additional insightinto links within its securities portfolio.

For more information, please visitwww.standardandpoors.com/crs

Standard & Poor’s Cross Reference Services provides comprehensive referencedata across the securities universe. It can assist you in keeping a check onconcentration levels, identify where your firm has multiple risk points and helplimit your exposure to individual states. What’s more, it’s designed to be flexibleand responsive, so it can meet your firm’s own specific requirements.

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Documents

Business Entity Data · Business entity data has been in the limelight ever since the fall of Lehman. While few data management projects secured funding this year, business entity