The Elements of a Fit-For-Purpose Financial Product Taxonomy -

A financial services’ data analytics taxonomy will ensure clarity when analytics is discussed during meetings, presented in reports, and are a part of submissions. The challenge is developing a financial taxonomy that can manage all the products and the many internal and external financial classifications.

Furthermore, a fit-for-purpose taxonomy should have the granularity for identifying the unique structural features of every current and future financial product. In addition, it should be cross-referenced to all other classifications and hierarchies used in the present and the future, and unhindered by the hierarchy or the variety of product features that help match a unique attribute.

The success of financial product taxonomy can to an extent be measured by the degree to which reporting deadlines and service level agreements for internal customers are improving. Other indicators include the increase in straight-through processing and the ease of doing business quickly. How the taxonomy facilitates the recognition of a financial institution standardized product codes in its security master, positions and transaction repository and entity master is also an indicator of its effectiveness.

The fact that most financial institutions recognize that their product classification process needs improvement and it is time to discontinue reconciling product codes at numerous points in trading, analytic and reporting processes means they are aware of the need for a financial product taxonomy to carry the business forward more efficiently.

Moreover, with the potential for efficiency, straight-through processing, and improving the trade lifecycle, risk management, product control and reporting, a common taxonomy has its appeal.

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