Understanding the impact of governance reference data on stewardship

When it comes to reference data in the investment chain, global regulators have come to understand operational risk as a key contributor to systemic risk. Faulty reference data is considered to be one of the major contributors to operational risk in financial institutions and can cause significant financial loss.

Up to three quarters of the data used in financial transactions is reference data, it helps key counterparties to work together efficiently, be it prices, issuer data or corporate actions.

Maintaining data integrity and consistency is fundamental to improving the accuracy and reliability of financial transactions. Reference data in the stewardship and voting context matters just as much, if not more given the global inconsistencies of governance disclosures.

How faulty reference data impacts asset managers and owners

According to analysis from management consultants Oxera, Accenture, Greenwich Associates and CapGemini, the risk to firms’ front offices from sub-optimal trading decisions due to faulty corporate actions is estimated to be €1.6 billion – €8 billion per year globally. Available data on the European fund management industry indicates that firms in Europe incur total actual costs in the region of €65m – €140m per year from losses due to faulty reference data.
This would imply an annual loss of €300m – €700m to the fund management industry worldwide. [Source: Oxera/DTCC, Corporate Action Processing: What Are the Risks?, May, 2004]

Governance reference data and stewardship

Shareholder voting and governance research is plagued by problems such as poor data quality, lack of global standards, data duplication, lack of automation and lack of investment in systems. Missing data can mean at the very least wasted time and effort looking for answers, at the worst, the wrong votes.

How governance data outsourcing can mitigate risk

Asset managers face significant pressures from regulators and clients to improve their stewardship operations. Managing those challenges in a cost-constrained world is where data experts like Manifest can help.

Manifest is a global expert in shareholder voting and governance data collection, consolidation, cleaning,analysis, co-ordination and distribution. Manifest helps asset owners and managers focus on the strategically important  stewardship role of engagement by letting  governance data experts provide the tools to make better decisions – and retain overall control of fiduciary responsibilities.

For a no obligation discussion about your governance data questions get in touch by using the form below or call us on +44(0)1376 503500

 

Last Updated: 14 August 2017
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