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When we look back at the near-collapse of the financial system in 2008, is it possible we will see the beginning of an era when banks have the tools and infrastructure in place to measure, monitor, and manage customer and transactional data and total exposures across legal entities, business units, locations, and product lines?.The scale of some global organizations has been so great that they decided, over time, to manage their businesses by breaking things into smaller units. Some established a variety of legal entities either to meet local laws and regulations or for tax planning reasons when expanding their presence around the world. Many adopted a portfolio approach to running their businesses, giving senior management of the lines of business the autonomy to compete more nimbly in the marketplace. Generally speaking, banks have been able to aggregate some of their data so that senior corporate management had the ability to understand how the lines of business were operating. But systems were not sufficient to aggregate data across the organization, which would have allowed them to measure and manage their risk on global, consolidated, and legal-entity levels. This would have helped banks to identify concentrations arising through common exposures or sensitivity to common shocks, and analyze the key linkages and exposures across their individual firms as well as in the system. The model that segregates data by silo needs to change. Large banks must consider reversing their perspective and taking a top-down approach that values data as a strategic enterprise asset that must be actively managed, monitored, and maintained to support the broader goals of the organization.
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