Rise of the CDO

The Chief Data Officer - innovation driver and enabler?

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In retrospect, there is a lot of truth in this thesis. The CDO is represented in many committees of the traditional bank, its sphere of influence theoretically covers all relevant areas of the bank and yet the effective scope of influence is limited, the impact of the function limited.

Market dynamics, technological quantum leaps and unprecedented pressure from international supervisory authorities are forcing a central function that centralises the data agenda of banks, controls it stringently and opens new doors. The CDO steps out of the shadows and offers a solution to address these challenges:

More complex world: new and complex data requirements, for example from ESG, Bird and IReF require an efficient scope with data and no longer allow banks to think and work in silos. Data must be networked and managed according to harmonised standards. Increasing data requirements necessitate data transparency.
Technological acceleration: The world is talking about GenAI. Where technological quantum leaps have been made, their effective utilisation has not got off the starting block. The reason for this is a lack of data transparency and deficiencies in data quality and data provision. Only the CDO with its set of standards for harmonised data management creates the conditions for the use of technological innovations. At the same time, (Gen)AI applications offer opportunities to support and scale data management, e.g. for data cleansing and the detection of data quality deficiencies.
Regulatory pressure: International regulators are tightening the thumbscrews on banks. The ECB in particular is using its range of sanction instruments to force banks to implement impact-orientated data management. The supervisors are demanding clear responsibilities, a deliberately set strategic central data agenda, clear Board of Directors comittment and harmonised, effective data management standards. Ultimately, many of the supervisory authority's key points of criticism boil down to one question: who in the bank is centrally responsible for data?

Just setting standards is a thing of the past - the modern CDO is becoming an enabler and controller in the banking ecosystem! To effectively tackle the complex challenges associated with data, the CDO role needs to be made effective. To do this, the role must be reinterpreted and modernised. Today, the CDO defines himself as a service provider for finance, risk controlling and operations, over and above establishing regulatory compliance and setting standards. This makes the CDO a controller, coordinator and enabler on the path to becoming a data-driven bank:

Pragmatic standard setter: Definition of clear, implementation-orientated and pragmatic standards in data management

Driving innovation: Consolidation and creation of a strategically oriented prioritisation of data use cases

Proactive Service Provider: Active support of the specialist departments in the implementation of the standards and assumption of implementation responsibility as a service provider for specialist departments

Managing complexity: Recording, prioritising, consolidating and harmonising the data requirements of specialist departments in the light of the bank's strategic data agenda

Data Enablement: Building an active data community side by side with IT and specialist departments and practice-orientated enablement of employees

Sailing in strong winds: In an effective organisation, the CDO has a clear Management Board commitment to the bank's data agenda - manifested in a data strategy. This gives the CDO a clear mandate, effective competences and responsibility with real rights of intervention embedded in clear governance

CDO – So what?

In the past, as today, the CDO operates in the second line and creates clear added value from processes and standards. But it should not stop there. By expanding the data scope beyond traditional management-relevant data from risk, finance and reporting, the CDO enables the realisation of earnings potential and creates multidimensional added value:

Roles & responsibilities

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Dealing with a changing and dynamic regulatory environment

Chart "Further development and convergence of existing regulations"

Why is a CDO needed? So far, it has worked with business and IT, hasn't it?

The use of data is becoming more complex and networked, and data must be consistent across individual specialist disciplines. Efficiency is required in the preparation of data for all data users, the prioritisation of requirements across different specialist areas and in the design of a uniform governance framework.

What is the role of the CDO? What is he responsible for? How does the interaction with the specialist departments and IT work?

Market dynamics, technological quantum leaps and unprecedented pressure from international supervisory authorities require a central function that centralises the data agenda of banks, controls it stringently and opens new doors.

The CDO fulfils these functions:

Standard setter: The CDO defines standards for data management and monitors their implementation (data dictionary, overview of data owners, lineage, controls ...)
"Owner" of cross-discipline functions: All functions that cannot be assigned to a single discipline are cross-cutting functions. These include central data hubs (DHW, Lake, etc.), their structure, supply processes and central functionalities (creation of borrower units, generation of certain key attributes such as regulatory industry identifiers, etc.).
Requirements manager: This includes recording the requirements for architectural adaptations, analysing the effects/comparing with other requirements, managing the timing/implementation
Guardian of the architecture and interface landscape: The CDO ensures that it is clear at all times where the "golden source" for information is located, that applications, DWHs, data lakes and interfaces are expanded sensibly or that new components are set up. He avoids redundancies and realises synergies.
And yes - the fulfilment of regulatory requirements (for data management) also remains the task of the CDO. He remains the central point of contact for external and internal auditors and the supervisory authority

Since 2020, the regulatory environment has become more complex and the pressure from the supervisory authorities has increased enormously.

Even large financial institutions that previously invested large sums (up to hundreds of millions) in data management solutions have been affected:

More findings are being made (in the double-digit range),
of which more and more are considered critical (F4 - very high impact).

The CDO is in the right position to master the challenges associated with the content of the findings:

Clear responsibility (top-down):
- The CDO has central responsibility
- Advancing the data agenda, such as introducing a data strategy and quantifying implementation successes
- Direct reporting line to the Executive Board
Effective data management solutions
Enforcing standards in the operational business and in IT
Participation and representation in all relevant committees with a central role in enforcing data management principles

Further development and convergence of existing regulations

Regulatory expectations are increasingly emphasising the core concepts within the CDO's area of activity, e.g.

the articulation of a bank-wide data strategy

the sustainable introduction of clear responsibilities that are anchored in the Bank's organisational principles

an effective data governance framework including the introduction of

an integrated data architecture

More and more regulatory requirements with increasing complexity

A unit is needed that bears the main responsibility for monitoring existing and upcoming regulations

The scope of data covers more and more areas of financial institutions

Numerous regulatory requirements have large overlaps (e.g. IRBA and RDARR), which is why a holistic implementation approach should be sought

Solutions in a constantly changing environment

With regard to the competences and responsibilities of the position

The promotion of innovation is not only desirable, but necessary

Acting as a central point of contact for communication with the supervisory authorities Contributing to the value creation of the financial institution

In view of increasing regulatory expectations, banks are facing numerous challenges, some of which they have even brought on themselves:

Diversity and multiplicity of requirements
High frequency of additional regulations
Broad coverage of business areas
Complex corrective measures
Lack of clear, overarching responsibilities
Lack of comprehensive understanding of regulatory requirements and their overlaps

The CDO becomes a success factor for two reasons:

Management of regulatory requirements and communication
Business knowledge and understanding of the topics covered

The CDO's contribution to value creation

The CDO drives the bank's value creation by drawing on his or her organisational skills and extensive knowledge of regulatory requirements, expectations and overlaps.

Saving time and resources
by directly defining responsibilities, with the CDO acting as the main person responsible for regulatory requirements within the data universe

Avoidance of penalties
through a deep understanding of regulatory requirements and their overlaps as well as a more holistic and scalable implementation

Cost reduction
for corrective measures, as less effort is required due to more efficient management of corrective measures and clear responsibilities

Profit increase
with the help of an optimised interpretation of regulatory requirements, e.g. with regard to minimum capital requirements