Development of a Risk Based Approach (RBA) for Data Quality Test Transaction

Client Needs & Objectives

Core Objective: confirm reporting accuracy and confirm proper transformation of information to satisfy reporting requirements

Our client, a top-tier European Investment Bank, solicited us to:

Develop a Risk Based Approach to identify areas of risk susceptible of generating reporting misstatements
Design a Transaction Testing methodology that is data-driven to sample and test transactions to ensure reliance on data
Design a Report Compliance methodology that is instruction-driven to ensure that regulatory reports are free of misstatements
Run a Proof-of-Concept on all three pillars of the project

Risk Assessment

Annual risk assessment conducted by Data Governance’s SME to identify areas of risk of misstatements at the report, MDRM, and financial product levels
Risk assessment is to be revised quarterly as needed
Risks are assessed along a pre-defined list of criteria specific to each level (report, MDRM, product)

Transaction Testing

Testing methodology based on previous risk assessment, with three key milestones:
- Data Gathering: definition of transaction population
- Sampling: sample size based on statistical approach
- Testing & Reporting: definition of a set of KPIs for reporting

Report Compliance

Testing timeline is designed based on report risk assessment outcome and report filing frequency
Top-down and bottom-up testing approaches

Increased confidence due to:
Custom methodology that is based on the bank’s areas of risks and unique reporting environment (products, systems, report filing history, etc.)
Standardized methodology that strikes a balance between industry best practices and practicality that will ensure a solid framework and feasibility
Proof-of-Concept phase helped the Client understand the model’s strengths, as well as the required efforts to implement and run the methodology going forward

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