Standardizing Company Names

When Shakespeare’s Juliet uttered the immortal line “what’s in a name?” it was clear she had not grasped the intricacies of good data management in the financial services sector.

The mantra is simple—a single company ought to be known by a single company name.

This is straightforward in theory, but in practice, databases containing company names are riddled with inconsistencies.

Human error is an obvious contributing factor. Omissions of apostrophes and accents, the misspelling of words, local naming conventions and errors of translation all plague the input process. Without a set format to adhere to, market practitioners have had to make up standards as they go along.

The upshot of erratic data entry is apparent—financial services firms end up holding unconsolidated, duplicate records about their clients. This means they are unable to construct a single client view, so data-based risk assessments are automatically erroneous.

Given the negative impact a lack of convention has on risk assessment, it is curious that a move towards standardization has not yet occurred, especially considering firms have been aware of the problem for many years.

London-based David Thomas, client data manager in the global reference data and operations departments at Barclays Capital, says the sluggish response of the industry illustrates that naming standards have not been problematic enough to command budgets.

“As per other initiatives in the client data space, the driver to make this change has never reached a point where it has been sufficient to overcome the difficulties or cost of implementation,” says Thomas.

Iowa-based Tony Brownlee, managing director at Kingland Systems Corporation, says the data held by financial services firms is entrenched in antiquated systems, meaning any attempt at standardization would be “slow and arduous.”

“The root of this problem is that most of the financial services firms have many different legacy systems with different naming conventions within them,” says Brownlee

He also points to the fluid nature of the market: “When you look at the complexity of the businesses throughout global financial markets and the history of most of the major players, things are constantly in a state of change, which makes fixing naming conventions difficult.”

Regulation

With financial services firms displaying an inert reluctance to implement standardized naming conventions, regulators are running out of patience.

London-based Colin Rickard, managing director, north and west Europe, DataFlux, anticipates that the situation will soon be remedied though, as firms are forced to respond to pressure from the market for accurate data management.

“There’s been a certain amount of complacency, but I think regulation will drive [the problem] to be fixed. Customers demanding better standards will want it to be fixed.”

Rickard is confident that although there is no governance in place mandating a standard company name, the current regulatory push for single client views will drive firms to realize that naming conventions are a necessity.

Rickard believes these regulations will force financial services firms to “not only go back and consolidate past data, but also put governance in place that stops them diverging in future.”

In lieu of formal regulation, some data providers have set about designing their own naming standards. By dissecting their own policies and implementing strict rules about translation, transcription and character set, firms are reaching interesting conclusions about the effectiveness of standardization based solely around a company name.

London-based James Redfern, head of sales and marketing, CouterpartyLink, where naming conventions are central to operations, says “our view is that the name alone, whether transformed from a foreign language or not, is rarely enough to identify an entity/company; you need addresses and other correlating information such as unique registration numbers from named sources.”

Redfern’s concerns about the insufficiencies of naming conventions are echoed by other industry specialists; for instance, Barclays’ Thomas says a common identifier code similar to the CUSIP would be of more benefit.

Across the industry, opinion is fractured. While all agree standardization of reference data is essential, there are concerns over whether a naming convention will be as revolutionary for data management as some claim. It seems that when Juliet questioned “what’s in a name?” she might have been on to something.