Data quality: Staying in charge of your data

You do not even have to actually be in breach of FSA rules: arousing the regulator's suspicions that your lack of appropriate controls and systems might lead to a breach is sufficient for action to be taken.

Brokers produce reports for a variety of entities, both internal and external: the FSA, banks, underwriters, shareholders, auditors and non-executives. Anecdotally, around one-third of all broker data systems are poor - expensive and archaic - making it difficult to share data accurately within the firm and with third parties. Yet any discrepancies uncovered by these parties, or difficulties encountered in garnering any requested information, will result in anxiety at the least and uninvited interference at worst. Inaccurate information, or even the inability to produce good information in a timely fashion, suggests that controls and systems are not adequate.

One insurance entity that was unable to respond promptly and appropriately to an ad hoc FSA review was required to implement a new broking system from scratch in six months, which caused considerable disruption to the business not to mention the unplanned costs and project risk. Although there was no actual evidence of poor-quality data, the firm's inability to respond adequately undermined the credibility of its systems.

The FSA, quite rightly, is focused on the controls surrounding client money and the likely accuracy of your data in this respect. Any negative evidence, or even the lack of positive evidence that your manual procedures and IT systems are designed with data accuracy and security in mind, is liable to lead to swift and punitive action.

Inefficient systems
Yet most brokers are struggling with old technology that is expensive to maintain and not particularly effective, providing poor management information that is both hard to extract and not at the right level of detail. Additionally, many systems are inherited and their users do not capture the correct data as a result.

Apart from the obvious business advantages of having good-quality data readily accessible in an appropriate format, there are real regulatory and compliance reasons for ensuring that management information can be produced in a timely manner and with a high level of data accuracy. SYSC demands that you implement good controls over all your systems: any lack of evidence that this is the case can lead to extreme measures being imposed by the FSA as shown above.

You might not immediately realise that the quality of your data is poor but if you cannot answer the following questions with confidence then the chances are that it is.
• Can you generate management information promptly and accurately?
• Does your finance team produce management accounts without spending hours if not days collating and reconciling information?
• Does your reported data come from one system?

There are a number of root causes for poor data quality and, even if you are not yet showing any symptoms, you may still be carrying the disease. Indicators include poor input controls, lack of understanding or training, a good data processing application but poor reporting mechanisms.

The demands placed on brokers for more reliable and detailed information will only increase with the advent of Solvency II. Brokers are well advised to take a good look at data processing and reporting systems to see if their systems will do the jobs being asked of them. Successfully implementing a new or enhanced system can take anywhere up to 12 months; the FSA might not give you this amount of time to make the changes when it comes calling.

Ian Singer, partner, Littlejohn

Source: Professional Broking – July/August 2010