Harmonizing Babel: Business Ontology Standards in Focus

Paul McInnis, Head of Enterprise Data Management, Data Management

Business Ontology Standards in FocusThe Wall Street Journal, in a headline six years ago, asked: “Are dictionaries becoming obsolete?” The article, to the chagrin of some traditionalists, implied that if the dictionary wasn’t yet obsolete, than the end would be approaching soon. Yet, in an era when even Scrabble saw fit to adulterate its official dictionary it with millennial slang — be it “lolz,” “lotsa,” or “ridic” — hope remains for the traditionalists, as best practices in data management are driving the adoption of thorough and comprehensive business glossaries. At this point, advocacy may be isolated to data scientists and CIOs, but make no mistake, appreciation and the demand for precision around ontology standards is growing as this uniformity, or lack thereof, is among the larger “gating” items for large-scale enterprise data management projects.

For the uninitiated, a business glossary is the definitive reference guide that establishes and cements a standard for business terms and relationships across an enterprise. In an era of ever-sprawling financial institutions, in which organizations stretch across regions, asset classes and cultures, a definitive business glossary is critical to engender a common understanding around what each term means for all employees and business partners, and in all cases.

It sounds simple, but it’s the overlooked, often-minute discrepancies in business terminology that wreak havoc when it comes to an organization’s efforts around accuracy and consistency in their data. Consider, for example, the potential variables that go into an assessment of market value. If it’s fixed income, is the metric simply what’s quoted by Bloomberg or Reuters, which is the case in most US bond markets, or do you include accrued interest as is more typical in Europe? If you’re working with illiquid assets such as private equity, are those assets valued at cost or fair value? And if it’s the latter, is it determined using forward-looking or historical earnings measures? Even something as simple as account data can trip up organizations when there isn’t enterprise-wide alignment. Take your typical mutual fund client: should these businesses be categorized by company name, fund family name, or by fund?

A business glossary effectively answers these and other questions for the organization by mapping out each and every relevant term and the very specific components that go into defining it. For large, global enterprises in financial services, business glossaries can consist of literally thousands of terms, and — as might be expected — can take months to formulate.

To be sure, the movement to create and adhere to absolute ontology standards extends beyond the walls of individual organizations. The EDM Council created the Financial Industry Business Ontology, or FIBO, to address this very issue and create a uniform conceptual ontology that helps to eliminate any ambiguity around the meanings or structures of financial instruments or market data. The goal is that with industry-wide alignment, data can be harmonized and shared across data repositories to support efficiencies and automation, while at the same time enabling thorough and comprehensive risk analysis across the sector.

We’ve found that most companies, when they’re successful in building out their business glossary, will take on these projects in stages. They may start by tackling one bucket at a time, such as security reference data, and then once completed, move on to another, such as transaction data.

Moreover, in my experience, success with these projects demands the support of senior management and the attention of a dedicated team. The executive buy-in is critical to push through what are often culture-influencing changes and protocols, while execution demands an empowered team committed to the project. Once a glossary is established, there also needs to be an “owner” who can work with the business and IT teams to ensure compliance and consistency, particularly as the glossary evolves over time. When these pillars aren’t in place, the efforts will often fall victim to the same tribal knowledge that ensues without oversight and an advocate.

While all of this requires considerable work and attention, the rewards far outweigh the effort. Once aligned, organizations are in position to take control of their data and implement robust EDM platforms that deliver new efficiencies and capabilities. This is particularly true in today’s competitive market and against a backdrop of heightened regulatory scrutiny.

Besides, for the Scrabble players, robust business glossaries can open up a whole host of possibilities – acronyms like VaR, NAV, HKEx or ZCYC certainly can’t hurt.

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