Top 5 Reasons Why Financial Institutions Need Data Lineage

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A CIO, a Director of Compliance, and a government auditor walk into a bar. They all point to a page of your last report and look at you, their eyes squinting at the figures. “Where did THIS number come from?” they want to know.


It’s not a joke. 


It’s a potential nightmare.


In the financial industry, data lineage (i.e knowing where your numbers came from and what happened to them along the way) is not a nice-to-have. It’s a must-have. 


Here Are the Top 5 Reasons Why Financial Institutions Need Automated Data Lineage


1. It’s All in the Numbers

Your credibility as a financial institution rests on the accuracy of your internal calculations and external explanations. Whether you are dealing with financing, valuations, transactions, or investments, you not only need to get the numbers right, but you need to prove that they’re right – and you need to do so as soon as possible whenever a question arises.


Additionally, your level and demonstration of accuracy is crucial to customer service. It’s no small matter for your clients to trust your institution with their finances. They do so because they have decided you are responsible, reliable, professional, and trustworthy. The burden of proof is on you to maintain that reputation – and it’s a heavy burden to bear. 


If Darlene from Dallas puts in a frantic call about why her account is showing $50K less than it should be, you cannot take days or weeks to track down and correct the error. Darlene needs an explanation and a solution within a day (and preferably, right now) to be reassured of her ability to rely on you with her money. 


A strong data lineage solution is a critical partner in this effort. Automated data lineage for banks, or for any other financial institution, enables your team to identify in minutes where the current figure in Darlene’s account came from and ascertain if there was an error in the data pathway, or alternatively, to confirm the figure and provide a reasonable explanation. You will be able to address Darlene’s concern within a few minutes, most likely while customer service still has her on the call. 


2. Your Compliance Standard is My Command

The world of compliance is populated by little acronyms that make big demands of your institution: GDPR, BCBS 239, TRIM or CPRA with PII. Keen awareness of the information in your systems – what it is, where it came from and where it’s going – is crucial in meeting those demands.


If Bob from Belgium calls your institution and requests the removal of his personal information, you need to be able to dive into your system, locate all – yes all – of Bob’s PII and send it on a one-way trip to the information incinerator. 


If the ECB’s Targeted Review of Internal Models (TRIM) is targeting your institution, you need to be able to show that your internal models are accurately and adequately mapping your risk.


When you operate in a field as highly regulated as finance, data lineage for regulatory compliance is what gives you a firm hold on your data and the ability to pass compliance bars with confidence.

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3. The LIBOR Transition

LIBOR has been part of our financial lives for the past thirty-six years. Come January 2022, however, we’re going to need to say our goodbyes. 


The parting will not be easy. As of 2018, contracts referencing LIBOR accounted for an estimated $200 trillion in gross national exposure in the United States. The new benchmark standards include SOFR, Euribor, ESTR, Sonia and Tonar. 


For financial institutions, the LIBOR transition requires significant preparation. How much of your system data is influenced by LIBOR? Before you bid LIBOR farewell, you will need to identify every piece of LIBOR-based data in all of your business systems, locate centralized data through-lines that account for and influence your LIBOR-related data and ensure that you can transition to your region’s new benchmark standard without leaving holes or broken pieces within your system. 


If you have a smooth, efficient method of implementing automated data lineage, that should be no big deal. If not, you will likely need to devote months to a manual data tracing and editing process over the course of 2021. And if your team doesn’t manage to complete it in time, you can forget about champagne toasts on New Year’s Eve 2022; you’ll still be in the office, sweating over your BI systems. 


4. “Stress-free Audit” is Not an Oxymoron

There’s nothing like an impending audit to drive up your BI team’s blood pressure. 


“What does this line mean?” 

“Where does this number come from?” 

“What’s the source for this figure?” 


These are the phrases they live and breathe for a month or more when it’s audit time. 


Somehow there’s never enough time to be fully prepared for an audit. Never. And given a limited time to manually trace hundreds of data lineage routes, that’s not surprising. 


With an automated data lineage solution helping you to ensure the accuracy of your reports, your BI team can answer auditors’ questions on the spot. 


5. Time is Money

Who knows better than the financial industry that time is money? Without an easy way to perform data lineage, financial institutions hemorrhage money every time they need to find out where THAT number came from. Doing manual root cause analysis through multiple systems across your entire BI landscape that involves many transformations can take days, weeks or sometimes even months.


Compare that with an automated data lineage system that tracks and traces the path and transformations for any data point in seconds. Whatever an hour’s work is worth to you, just multiply that by 100 or more. 


What should you do with all the money you just saved? Well, you’re the financial institution. We’ll leave that to you. 

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