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Improving data quality key to risk management: AIM study


November 11, 2005   by Canadian Underwriter


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Improving data quality is regarded as a key issue for risk management and regulatory requirements including Basel II, the Markets in Financial Instruments Directive (MiFID), and Sarbanes-Oxley are driving investments in IT, according to a 2005 AIM Global Data and Risk Management Survey.
“The results show companies see the close connection between reference data management and efficient risk management,” explains Martin Buchberger, head of Marketing at AIM Software. The percentage of companies planning to improve automation in this area grew from 64% in 2004 to 72% in 2005, underlining this finding, he added.
According to the survey, the methods to improve data quality include the automation of reference data and the processing of corporate actions data the areas in which the largest costs originate.
Forty-five per cent of the survey’s 1,070 respondents plan to increase the level of automation for corporate actions.
“Companies realize that they face serious operational risk and huge potential losses in this area,” Angela Wilbraham, the managing director of the AIM survey, said. “Group corporate actions are deemed to be the least automated and therefore most labour-intensive, error- and risk-prone areas.”
Sixty-four per cent of respondents claimed they already have a data management strategy in place for market risk, while 63% of the companies say they have addressed both credit risk and operational risk. This demonstrates the interdependence of quality of data and efficient risk management, according to AIM.
A majority of 63% of the companies relies on in-house solutions for their risk data strategy. The companies’ internal knowledge of specific risk structures has proved to be important for achieving a successful solution, the AIM study concludes.


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