Pretty soon the U.S government will have the equivalent of a chief data officer. This will be the person who occupies the post of director of the Office of Financial Research.
The OFR is new agency that will be for the collecting of data from financial corporations what the Internal Revenue Service is for taxes. This newly created department will be responsible for collecting whatever data is needed from financial institutions so that the industry as a whole can be analyzed and evaluated for the spectre of systemic risk. In effect, illness in one firm or group of firms will be spotted before it spreads to the market as a whole.
According to the recently passed reform bill, the OFR would eventually issue and maintain two different and very important public databases. One would be a database of the financial instrument types and another a database of financial entities and organizations. The OFR would be linked to a Financial Research and Analysis Center whose job will be to develop intelligence – or actionable data — out of the raw data — so it can identify emerging systemic risks. Congress would get an annual report.
Given its significant role, who should head up the OFR?
President Obama has a year to decide on the executive which Congress must then ratify. Should the individual have previous Washington experience? A former White House executive, Congressman or say Treasury official. What about Wall Street experience and if so what kind?
Surprisingly, data management qualifications aren’t at the top of the list, based on interviews with a dozen operations and data management executives.
The overriding consensus: a minimum 10 years of experience as the former chief executive or chief financial officer of a large multinational bank and/or aminimum 10 years experience as the chief risk officer of a large multinational bank. Additional data management expertise ideal but not required.
“Specific data management skills aren’t necessary and could be a hindrance,” says Gert Raeves, senior vice president of strategic business development for GoldenSource, a New York and London-based data management software firm. “Data management experts often have specific knowledge of data attributes and data models, but the role will first and foremost require someone with consensus building and financial experience.”
But weren’t some of Wall Street’s bulge bracket firms asleep at the wheel during the financial crisis? What makes anybody think that that kind of executive would be ideal?
Consensus building appears to trump the list of criteria. “The director would have to persuade financial firms of the merits of aggregating massive amounts of data and sending it on a daily basis to the OFR,” says Raeves. It could be a costly proposition depending on the type of data, the size of the organization and where it is stored.
Risk management experience would also be a big plus. It’s likely a chief risk officer would know all about what types of data would be required, how often it should be collected and from which organizations, says Raeves. Such expertise would also be useful in understanding what types of risk metrics could be used.
So where does data management expertise fit into the equation?
“The OFR will likely need to hire experts in data analysis for different financial products to design the data models and formats required. Then IT experts will have to complete the specs for the platform to collect and crunch the data,” says Daniel Simpson, president of data management firm Cadis in London. Cadis has a similar contract with another U.S. regulatory agency Simpson declined to name.
Michael Atkin, managing director of the New York-based Enterprise Data Management Council agrees that Wall Street experience is critical.
But he doesn’t discount the need for political savvy when it comes to leading the OFR. “It is after all a political appointment so some knowledge of the inner workings of Washington DC would be a plus,” says Atkin, whose group advocates that financial firms understand the importance of maintaining consistent and accurate enterprisewide data.
Atkin’s top three picks for the OFR directorship: the former chief operating officer of a large financial firm who is either retiring, previously left for a job in academia or for a job in Washington, says Atkin. Although an independently-run unit the OFR would be housed in the Treasury Department and overseen by the Financial Stability Board which includes the Securities and Exchange Commission and Treasury Department.
A former or current chief executive officer won’t do. He or she will likely not understand data management sufficiently, says Atkin. He or she can always hire risk management and data management experts as his or her right hand executives.
None of the banks or brokerage firms contacted by Securities Technology Monitor were willing to throw out the names of any candidates but cited JP Morgan, Bank of America Merrill Lynch, Citigroup and Bank of New York Mellon as the four top banks from which the Obama Administration should seek out resumes. Goldman Sachs was “too overexposed,” says one operations executive at a large New York brokerage firm.
Yet another data management executive at a New York bank says, “I just hope they don’t select another government bureaucrat for the job thinking that Washington experience is the only critical factor.” That sounds like pretty good advice.
This article can also be found at SecuritiesTechnologyMonitor.com.