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REVIEW
“
Risk and business management
functions are starting to take
advantage of the SCV
“Of that, between £432 million and £530 million is estimated to be governance on the SCV, it means it is more than just a marketing
needed to build the supporting infrastructure for SCV. The second asset. So which other parts of the organisation could benefit from it?”
most important element will be data cleansing at 20 per cent of the Not that the marketing department always welcomes this enforced
cost,” says Mustafa. sharing. One of the reasons why it has created the SCV itself is often to
If introduced as a reguatory requirement, many organisations circumvent IT constraints. If the database starts to get pushed out to
would undoubtedly build their view like a business continuity other functions, this will almost certainly reintroduce IT into the picture.
resource. But others are starting to realise the potential upsides of Definitions also start to become more complicated. “One of the
having this unified insight into customers. first things you find is number of customers. If you are a retailer
In research carried out in January by E&Y for its “Opportunities in looking at customer transactions by basket, you may have that linked
Adversity” report among 330 senior executives, 31 per cent had to a unique reference number from a loyalty card. But that individual
terminated high-risk customer contracts and 24 per cent had seen may have more than one card,” notes Gregory.
customer bankruptcies. “If you put those together, it underlines that If the goal of a shared SCV is to standardise business metrics and
now more than ever there is a need to report on and manage your allow numbers to be rolled up and drilled down, this can soon become
exposure to those customers,” says Mustafa. problematic. The differences in view required by each function will
While that may look like a case of closing the stable door after the mean a new set of business rules and compromises are required.
horse has bolted, many financial institutions have realised the At a certain level, there are fundamental differences between how
potential benefits to themselves in averting a crisis. “Our experience risk and marketing will integrate customer data. In the financial
in financial services is that many institutions have built SCV for services world, this goes to the regulatory standards and the demand
marketing and they now want to leverage that across other parts of to treat customers fairly.
the business,” says Chris Underhill, CEO of SmartFocus. “SCV for risk management is different,” says Matthew Dodd, global
His company has already created SCVs for the likes of Axa, RIAS, head of customer management at Experian. “From a marketing
International Personal Finance and Aegon. Having worked through all perspective, you have to get it right for data protection. At the same time,
the data quality issues, compliance concerns and business rules, the the way you allow pieces of data to influence your decisions is different.”
view is being seen as an important asset for other purposes. He takes the example of two records with similar names – Matthew
“We have seen marketing’s role change in organisations because Dodd and M. Dodd – which can only be matched to 70 per cent
they are seen as the owner of that asset,” says Underhill. “Now risk confidence levels. Where one record has a high risk score and another
and business management functions are starting to take advantage of a medium risk score, the response of marketing and risk departments
the SCV.” would be different.
When Data Strategy carried out the State of the Nation Survey last “You can’t allow that from a risk management perspective to dictate
October, it was notable that among companies boasting a SCV, 15 per how you manage each of those accounts. From a marketing
cent said risk management had access to it. Bearing in mind that only perspective, you may go ahead with an offer to the medium risk
30 per cent of responders worked in financial services, a major shift is record and not worry about the other one,” he says.
clearly underway. In the area of data integation and merging records, risk demands a
Historically, risk functions have been far more focused on legal much higher level of confidence and resilience than marketing does.
issues, compliance and actuarial-style approaches. Hard customer Regulators are concerned about lenders making adverse decisions
data has not really played a role. Yet it might have allowed many based on faulty data, because this does not constitute treating
banks to recognise that some of the credit derivaties they were buying customers fairly.
did not really merit the Triple A ratings being given by credit For this reason, a risk-driven SCV might rely more on a third-party
agencies, for example. bureau service to match records and provide a unique identifying
Equally, mortgage lenders who went heavily into the buy-to-let number. “When you look at the bureau report, you see there is a lot
market might have recognised that some customers were piling up of rigour that has gone into linking customers,” says Dodd.
debts which were very exposed to any downturn in demand. They Being able to reference historical and external data sets which lie
may be learning the lesson too late, but if it averts a similar outside of the SCV is very valuable when the quality of the match is
catastrophe next time around, it is a lesson well learned. critical. While this has a higher cost than the approach taking for a
“We have been seeing this trend for some time,” notes Darron marketing SCV, there are benefits. “If you can produce a probability
Gregory, head of insight and analytics at Celerity. “Where it started to of default and express that at a customer level, that is looked on very
surface was in the area of data governance.” favourably by regulators,” he says.
When marketing departments have built a unified view of Customer-level risk indicators that are created to a high level of
customers, the parent company can often get twitchy about how that confidence mean a bank does not need to set aside as much capital
data is being protected and policed. “For some organisations, it is the to cover its exposure. With institutions struggling to raise cash and
only place where they have that overiew,” he says. So when a simple keep a high liquid base, this is a major benefit and a reason for the
customer request arises, such as opting-out of sales calls, the data surge of interest in the concept.
governance process directs that flag to the SCV. In the same way, having a unified view of the customer’s product
Now the business recognises that this is an important indicator holding and payment history could provide early indicators of any
which needs to be known about across other functions. So opening up problems. Undoubtedly, the financial services sector will emerge
the SCV to greater access starts to make sense. “In the last two years, from the current crisis with better customer data to hand. Whether it
companies have woken up to the fact that if they are doing data makes better decisions as a result can only be speculated on. a71
10 DATA STRATEGY | REPORT | APRIL 2009
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