Evolution of the CDO

With data now driving the banking business model, the role of the Chief Data Officer (CDO) has become essential. By expanding their focus beyond technology to wider business issues, CDOs can evolve into service providers for finance, risk, operations, and marketing, potentially becoming guardians of compliance, and enablers of value.

Data now underpins almost every part of a bank’s business, powered by cloud computing, and accelerated by generative AI (GenAI), which uses and generates huge and growing volumes of information.

As banks seek to harness new technologies to boost efficiency and innovation, some are being hampered by insufficient data transparency, and deficiencies in data quality and availability. And, with data usage becoming more complex and interconnected, they may also lack consistent data formats and uniform governance across the organization. Failure to adopt Gen AI and automation at pace could leave some banks trailing established competitors and new disruptors.

Regulatory frameworks are also quickly evolving, creating new and complex data requirements, with increasingly rigorous standards for data management, reporting, privacy, security, ethical and safe AI deployment, and transparency. The price of non-compliance can be high in terms of financial penalties and reputational damage.

Although many of these frameworks originate in the EU, there are also regulations emerging around the world, including in the Australia, Brazil, China, Japan, Singapore and the U.S. Two European regulations – the Digital Operational Resilience Act (DORA) and the EU AI Act – are becoming increasingly relevant internationally, functioning as global standard setters.

Companies should also adapt to new and changing frameworks for environmental, social, and governance (ESG), which guide companies on sustainable and ethical practices. These include the Global Reporting Initiative (GRI), the International Sustainability Standards Board (ISSB), and the Corporate Sustainability Reporting Directive (CSRD). The latter requires EU companies – and companies with EU subsidiaries – to report on the impact of their activities on the environment and society.

However, many banks lack clear responsibilities for data and may struggle to gain an in-depth understanding of regulatory requirements and their overlaps. The European Central Bank (ECB) has identified flaws in some banks’ capital requirement models – despite significant investment by financial institutions in data management solutions.

Many international regulators are appearing to tighten the thumbscrews on banks. The ECB in particular is using its range of sanction instruments to force banks to improve data collection, enhance data management processes and revise risk assessment methodologies.

What’s needed is a centralized data function that harmonizes and oversees banks’ data agenda, to help them get the most out of data. Which is where the CDO can step up.

The CDO’s role is evolving beyond regulatory to become a service provider for finance, risk control, and operations, driving the transformation to a data-driven bank.

Marco Lenhardt

Partner, Financial Services

KPMG in Germany

The CDO as strategic data guardian

U.S. banks were amongst the pioneers of data management, embedding the role of the CDO into their organization, with a strong emphasis upon technology and IT. In Europe, on the other hand, the concept of CDO is at a relatively earlier stage, although banks in this latter region are more likely to hand the incumbent a wider brief that covers data management and strategy.

By taking central responsibility for data, including ownership of central data hubs, the CDO can be a ‘standard setter’, to establish and monitor common standards for data, and lead a bank-wide data strategy with full board commitment. This gives the CDO a mandate, with real rights of intervention embedded in strong governance.

“ESG in particular has brought a whole new world of data to the forefront” says Rachel Tracey, Partner Financial Services Technology Enablement, KPMG in the UK. “CDOs should oversee data collection and processing, to ensure high-quality data from reliable sources.”

The CDO should also become a proactive service provider, supporting the implementation of data standards, and building an active data community, working closely with IT and other functions. As guardian of an integrated data architecture and interface landscape, the CDO communicates reliable sources of information, and helps ensure that data storage and interfaces are expanded sensibly, to avoid duplication.

Another key activity is to manage complexity, by recording, prioritizing, consolidating and harmonizing the data requirements of different functions, in a way that is aligned with the bank's strategic data agenda. The CDO can help accelerate the safe use of Gen AI, by prioritizing data use cases, enabling banks to adopt technology at speed, and to offer sophisticated digital services to customers.

According to Chris Ayres, Partner, Trusted Data Lead, KPMG Australia, “AI brings exciting opportunities for banks, but calls for strong governance from CDOs, to ensure ethical and quality guardrails, to deliver safe outcomes and preserve customer trust.”

Numerous regulatory requirements have large overlaps, which calls for a centralized approach to compliance. Consequently, the CDO should remain the central point of contact for external and internal auditors and the supervisory authority, with responsibility for monitoring existing and upcoming regulations.

Expanding the CDO’s scope can help create value across the bank in a number of ways:

Building customer trust and satisfaction

High data quality and transparency offers a clear view of the customer journey and enables banks to identify and target consenting customers with relevant products and services.
Winning competitive advantage through innovation

Through effective data management, banks can use advanced analytics to improve customer data and risk analysis, to identify viable business opportunities.
Improving operational efficiency

Enhancing data quality and understanding data sources lays a foundation for identifying and addressing redundant and/or inefficient processes. GenAI can dramatically advance data management, to “clean” data and detect any data quality deficiencies.
Making better decisions based on more reliable data

With access to consistent, reliable data across functions, management gains greater confidence in risk management, forecasting, customer behavior, and new product development.
Enhancing regulatory compliance

Effective data management gives banks the right data, in a consistent format, to satisfy reporting demands. It also increases the accuracy of capital requirement calculations, which can allow lower capital buffers, releasing funds for investment in the business.

From technology enforcer to value creator

The bank CDO has developed in recent years from a focus on IT to a more holistic role, involving a cross-business view of data encompassing strategy, standards, regulation, architecture, storage, and management.

A CDO with strategic and technical skills, and extensive regulatory knowledge, can help banks build dynamic, data-driven businesses, while also complying with ever-stricter requirements for data privacy and security, capital, and ESG performance.

As Robert Westbrook, Global Trusted Data Solution Leader, KPMG in the US, explains, “By gaining a strong understanding of the bank’s business strategy and operations, the CDO can align data strategy, data governance, and data management capabilities with key corporate responsibilities and ambitions, to build trust in data.”

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