Rise of the chief data officer in China
Role is just emerging but fast evolving due to the rapid expansion of Chinese banks and the explosion of big data
The role of the chief data officer or CDO is ever-evolving in today’s data-driven age. The first breed of CDOs came on board international banks over 10 years ago, in response to regulations driven by the 2008 global financial crisis.
Banks lacked standards and governance processes for managing data and the CDO’s job was to fix the issues with data quality and lineage, and ensure regulatory and compliance satisfaction.
Since then, we’ve seen the CDO’s role in global financial institutions shift from a reactive and compliance-focused approach, to one that is more proactive and strategic.
In China, however, the role of the CDO is just emerging but fast evolving, due to the rapid expansion of Chinese banks and the explosion of big data. Today, very few Chinese financial institutions have designated CDOs at the enterprise level but this is quickly changing. Here’s why.
Data complexity and regulation propelling CDO’s role
In the last 10 years, Chinese firms have been facing a deluge of big data on a daily basis. According to IDC, the Global Datasphere will grow five-fold from 33ZB (zettabytes or one billion terabytes) in 2018 to 175ZB in 2025.
In the financial sector, the challenges are even more complex due to structured, semi-structured and non-structured data streaming from various sources, making the pool of data extremely fragmented. And when Chinese language sources are added in the mix, the issue is compounded. Data fragmentation creates inconsistencies and misalignment, and ultimately exposes firms to unnecessary risks and costs.
The changing regulatory environment is another factor impacting the importance of the CDO’s role in China. New regulations are creating more open financial markets and enabling China Inc to expand their international operations.
As Chinese financial institutions become more integrated with global financial markets, they are compelled to adopt world-class technologies and data governance processes to comply with global regulation. This is where a CDO plays a vital role – to chart corporate data policies, best practices and strategy.
Chinese regulators have also played a role in elevating the importance of CDOs in finance. Data governance and management has become integral to ensuring financial stability and mitigating risks.
In May 2018, China’s Banking and Insurance Regulatory Commission (CBIRC) issued “Guidelines on Data Governance for Banking Financial Institutions” and encouraged Chinese financial institutions to establish CDO roles within their organizations. Historically, this role has been shared across chief technology officers, chief information officers, market data heads, portfolio managers and research analysts.
Data quality and fragmentation are top challenges
So with the rise of the CDO in China, what are some of the challenges before them? In a Bloomberg market survey of data leaders from over 30 Chinese financial institutions conducted earlier this year, the overwhelming majority of respondents pointed to data quality as the number one challenge. Data quality issues impact robust business analysis, and hence influence decision-making processes and strategies required to deliver new growth opportunities.
In addition, data integrity is a difficult problem for many, with survey respondents pointing out that falsifying data is commonplace and the lack of a regulatory framework means international standards are not adhered. This raises all kind of issues with the availability, accessibility, accuracy, reliability and completeness of data sets.
Fragmentation is another challenge. With significant volumes of data streaming in from multiple sources, data heads in China are struggling to fully integrate, re-configure and translate this information into workable business strategies. What’s more, the majority of survey respondents engage multiple data vendors and face difficulties in switching to new data platforms due to legacy systems.
When it comes to AI, 80% of respondents note that new technologies such as machine learning can be adopted for data analysis. That said, none of the Chinese asset managers we spoke to have engaged external vendors to apply machine learning to their data platforms. Concerns lie in these new technologies creating risks in market volatility and valuation.
Advancements in natural language processing and data collection are driving automation across electronic execution platforms. Global firms are also tapping big data and machine learning to anticipate client demand and price swings.
As the challenges in data quality, integrity and fragmentation grow in complexity, the role of the CDO in China will only become more prominent over the long term.
The growing importance of quality, linked and actionable data cannot be underestimated. As the technology journeys for global financial institutions progresses, we will continue to share best practices to advance the role of CDOs in China as they chart a data-driven enterprise strategy.
Sunny Chhabria, CFA, is the head of enterprise data sales for Bloomberg APAC.
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