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LESSON - Compliance and Risk Management: Ten Critical Master Data Management Capabilities to Include in Your Evaluation

By Ravi Shankar, Senior Director of Product Marketing, Siperian, Inc.

The financial sector meltdown of 2008 and subsequent worldwide economic downturn has organizations across all business sectors bracing for tighter regulations and increased compliance demands. It raises a question for compliance officers and senior decision makers: Exactly what kinds of actions are legislators and government regulators likely to take? New agencies? Broad new legislative actions? Smart decision makers, irrespective of their industry, are seeking technology investments to help establish good governance models that in turn will help with regulatory compliance and lower their operational risk, no matter what kind of new regulatory environment emerges.

Effective regulatory compliance monitoring and reporting requires a strong combination of people, processes, and technology. But in today’s large organizations, the key to maintaining compliance is the proper management of data. Organizations with a strong data governance regime and the technological capability to carry out compliance initiatives are the most successful in meeting regulatory requirements. Master data management (MDM) is a valuable technology for firms in regulated industries because it provides both the framework for effective data governance and the technological underpinnings for compliance operations and reporting. MDM ensures that critical enterprise data is validated as correct, consistent, and complete when it is circulated for consumption by internal or external business processes, applications, or users. But not all MDM technologies are capable of addressing the various compliance requirements facing businesses today. Only an integrated, model-driven, and flexible MDM platform that is easily configurable can provide the functionality required to meet compliance requirements and lower risk.

MDM Technology = Master Data Governance

The critical functionality of MDM can be overlooked when companies focus too narrowly on near-term requirements within a single compliance endeavor or business data type, such as customer (customer data integration) or product (product information management). Firms that do so run the risk of investing in technologies that are not easy to extend to other compliance-related efforts across the organization. To reduce the risk of choosing the wrong solution, it is important for firms to consider key business data requirements across several key business functions, including sales, marketing, customer support, and compliance.

To avoid the common mistakes made by MDM software evaluation teams and ensure long-term success, you should make sure that key components are built into your master data management solution. By considering these 10 critical MDM capabilities in your MDM platform evaluation, you will be well on your way toward laying the foundation for a complete and flexible MDM platform that not only addresses your current requirements, but also can evolve to address unforeseen future data integration requirements.

  1. Manages multiple business data entities within a single MDM platform. Using an MDM platform that can handle multiple data types, an organization can begin to ensure compliance within a single business division to demonstrate a rapid return on investment and later extend the solution to accommodate other business divisions for even greater enterprise value.
  2. Permits data governance at both the project and/or enterprise level. It is critical that the underlying MDM platform is able to support the compliance-related data governance policies and processes defined by your organization.
  3. Works with your standard workflow tool. Workflow is an important component of both MDM and data governance because it can monitor compliance in real time and automatically alert the appropriate personnel of any potential violations.
  4. Handles complex relationships and hierarchies. Certain compliance initiatives, such as Basel II, require the ability to manage complex legal counterparty hierarchies. Make sure your MDM solution is capable of modeling complex business-to-business (B2B) and business-to-consumer (B2C) hierarchies within the same MDM platform.
  5. Provides support for service-oriented architecture (SOA) services. Since MDM is the foundation technology for providing reliable data, any changes made to the MDM environment will ultimately result in changes to the dependent SOA services, and consequently to the SOA applications. You need to ensure the MDM platform can automatically generate changes to the SOA services whenever its data model is updated with new attributes, entities, or sources. This key requirement will protect the higher-level compliance applications from any changes made to the underlying MDM system.
  6. Allows for data to be cleansed inside the MDM platform. Data cleansing needs to be centralized within the MDM system to provide clean data for compliance reporting. If your company has already standardized on a cleansing tool, then it is vital to ensure the MDM solution provides out-of-the-box integration with it in order to leverage your existing investments.
  7. Enables both deterministic and probabilistic matching. To achieve the most reliable and consolidated view of master data for compliance purposes, the MDM platform should support a combination of these matching techniques, with each being able to address a particular class of data matching. A single technique, such as probabilistic, will probably not be able to find all valid match candidates, or worse, may generate false matches.
  8. Creates a golden master record with the best field-level information and stores it centrally. It is important that the MDM system is able to automatically create a golden record for any master data type (e.g., customer, product, asset) to enable compliance monitoring and reporting. In addition, the MDM system should provide a robust unmerge functionality to roll back any manual errors or exceptions.
  9. Stores history and lineage. The ability to store history of all changes and the lineage of how the duplicate has merged is a necessary requirement to support compliance. Any compliance initiative will require the ability to audit such data changes over several years.
  10. Supports both analytical and operational usage. Compliance monitoring is performed within an operational system, while compliance reporting is performed using a business intelligence tool or data warehouse.
Successful Regulatory Compliance Begins with an Integrated and Flexible MDM Platform

Taking the time to build the foundation for a sound master data governance program is critical to the success of any compliance effort. These 10 requirements will enable you to identify and evaluate a suitable MDM technology platform—a prerequisite when managing your organization’s master data assets and establishing a consistent master data foundation.

Once your organization starts to make its departmental compliance projects operational, you are likely to find that your larger compliance requirements will expand to include other lines of business or geographies. Therefore, it is crucial to carefully evaluate the MDM options and choose a solution that will include all 10 critical requirements.

Taking the time to build the foundation for a sound master data governance program is critical to the success of any compliance effort.


It is also important to assess the MDM platform’s ability to support these 10 core capabilities out of the box, as they should be integrated components of a complete enterprise-wide MDM platform. In this way, you will be able to mitigate technology risk and improve your return on investment since additional integration and customization will not be necessary to make the system operational.

Another benefit gained by having these 10 MDM components integrated within the same MDM platform is that software deployment is much faster and easier to migrate over time. Finally, it is wise to check vendor references to evaluate the enterprise-wide deployments of their customers, and to ensure that the vendor’s MDM solution is proven and includes all 10 enterprise MDM platform capabilities.

For a free white paper on this topic, click here and choose the title “Seven Ways to Reduce IT Costs with Master Data Management.”


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