Adding Value with Business Intelligence

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  1. 1. tecH.toMM.>>Adding Value with Business Intelligenceindustry chAllenges: PrOBleMs whAt cOuld Be dOne next Andwith finAnciAl institutiOns hOw Business intelligence Financial institutions have been slower to cOuld helP?adopt such technology. Enthused to simply getWe should realize that information/mortgages out the door, financial institutionsdata/business intelligence has increasedrepeatedly lowered standards. Agents pushed visibility and transparency in our financialpaper in the market knowing well that many of institutions.the loans had little chance of being repaid. It starts with getting the data together first Now, the question arises how did such badbecause if clean data is not captured andmortgages become so prevalent in financialintegrated, there is nothing valuable for theinstitution? Why these financial houses werent technology to work on.motivated to receive the payments? Why did In the context of acceptable riskthey sell the mortgages for present values that determination, institutions will need to bringapproximate full payment? I think we know data to bear in two areas of the financialthe answer. In other words, these institutionsbusiness: 1) the business (mortgages) theyArvind Agarwalwere letting others to hold the bag. Thewrite and 2) the packages they buy. TheVice President & DWBI Global Practice Headproblem is, while the clever bankers on the mortgages written by the institution will needinbound side were writing the mortgages and to be tighter as the buying market for toxicthey were selling them, there had to be buyersloans dries up. Supported by data, toxic loansT he American economic slowdown andand on the outbound side many of the buying will no longer be able to be sold. Institutions subsequent global financial crisis were perhaps the biggest economic disruptorsin recent past. Who can ignore the shock wavesabout Goldman Sachs, Merrill Lynch and twinfailures of Freddie Mac and Fannie Mae and thebiggest Lehman Brothers Fall Out? While thefinancial system seems to have regularized; anda number of economic policies (like the DoddFrank Act, etc.) are being positioned for growth,the overall economic environment remainshighly volatile. Recently I heard the Japaneseeconomy is in recession. The Indian stockmarket also lost half of its value and the FDIand FII cashed out and took away 12 BillionUSD from the Indian market. Organizationsworldwide are seeking a trajectory for recoveryand success in the post-crisis environment. A relevant posturing in this milieu is - whatcan organizations do to help successfully manageuncertainty and complexity to foster growth? Some answers to these questions will involvethe management of information which isalso known as Data Management or BusinessIntelligence. Business Intelligence (BI) refersto technologies, applications and practicesfor the collection, integration, analysis, andinstitutions also happened to be the same selling will hold the bag. However, I believe thispresentation of business information. institutions! While toxicity was going out theall starts with the market controlling itself BI systems provide historical, current, andback door, it was coming in the front door. Inin terms of the packages they buy. Fullpredictive views of business operations, most BI language we call it lack of data governanceloan lineage within each package must beoften using data that has been gathered into aand data management.made accessible. In BI terms, we call thisdata warehouse or from operational data. The complicated packaging of loans that hadmetadata. It is also described as a Decision Support been subdivided into little pieces elevated theFull visibility into exposure via InformationSystem (DSS) since the purpose of Businessvaluation of some pieces to that of some of the Management/Business Intelligence tools andIntelligence is to support better businessbetter loans in the package. This made it difficult liquidity is going to be a necessity. Getting thedecision making. If implemented properlyto tell what was actually being bought. You would data act together in financial institutions willand supported by data, the technology existsthink prudence would be in order, given that thenot be an overnight sensation, but neither wasto mine the offers and consider factors suchfinancial buying institutions were selling in the this mess created overnight. With realignedas demand, location, and temperature andsame fashion, but within the companies, the backpriorities, the financial industry competitiveother product requirements, warehouse space room didnt know what the front room was doingbattlefield will move to the information front,and price. Technology also exists to suggestand vice versa, or maybe these financial behemothswhere most industries are today. This Dataa recommended decision with confidence. had grown so large, huge and important on paper Management, Governance and Data ProfilingWithout compounding bad decisions, companiesthat they believed they could not fail and even ifwill all add value to economies and hopefullythat make informed decisions based on information they fail, they would be saved somehow. Somemanage uncertainty and complexities thatfrom their BI systems have healthy bottom lines.institutions won at this level, and others did not. may arise in the future.2 May 2011