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Master Data Management, the essential ingredient of your transformation

Few domains bear as much impact on the success of your transformation than a solid Master Data Management (MDM) practice. In this Article, we will explore why Master Data Management is so impactful and how agricultural trading and processing companies ignore it at their peril. We conclude by advising companies to manage Master Data at the overlay level to ensure both rapid and sustainable results.

Master Data Defines an Enterprise

According to Gartner, Master Data Management (MDM) is a technology-enabled discipline in which Business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency and accountability of the enterprise’s official shared master data assets.

Master Data Assets are the most valuable information that a company owns, such as counterparties, raw materials, value-added products, and markets—and crucially, the relationships between them.

Because each of these domains of master data represents information that is needed across different business processes, across organizational units, and between operational systems and decision support systems, Master Data ultimately defines an Enterprise.

No one will dispute the fact that the management of key company data has always been crucial. Larger portfolios, having dealt with the intricacies of reporting unification earlier on, are found to have developed consistent and accurate Master Data. The challenge is equally crucial for Small and Mid-sized companies, which from our observations, are behind.

MDM is about agreeing on meaning and usage

Master data captures the key things that all parts of an organization must agree on, both in meaning and usage. The outcome sought is for the organization to share a common understanding of, for instance, what counterparties exist, where they are located, what commodities they have purchased or have been offered, among others. By the same token, the organization wants to a unified view of Raw Materials and Value-added Products it buys and sells. These will have totally different economic and process dynamics, while still part of the same Product Master Data.

Global ag trading and processing, from a helicopter point of view, features intrinsic complexities and non-standardized practices which have made the pursuit of adequate MDM more challenging. For a start, raw material and value-added product have complex characteristics but importantly lack globally recognized standards. Furthermore, from a managerial and statutory book structure, each company has a different way to organize itself legally and features distinct optics in the way it wants to look at its business.

This explains why, despite the development of MDM into a Vendor Category of its own, conventional experts and solutions, lacking insights and experience of how our supply chains are organized and work, struggle to resolve MDM in a sustainable manner for ag trading and processing.

Furthermore, given the degree of independence enjoyed historically by trading units and businesses within a larger portfolio, each unit has been left to deal with MDM and this removed the need to agree on a wider basis.

MDM anchors the Operational and Reporting optics

Master Data plays an anchorage role in both operational and analytical environments.

Operationally, let’s illustrate the role of MDM with two examples: a trader in your organization wants to trade a new Raw Material in South America. Normally, your Market Risk would have to validate that they can trade this Raw Material and will include in their Master Data. The same goes for trading with a new counterpart, which would have to go through a formal process within credit risk, which when accepted, will result in the inclusion of a new counterparty. Upon registration in the company’s Master Data, the trader should finally be able to enter it in whatever transactional system in use. Master Data Management is where the Enablement ought to be done.

When it comes to Reporting, the importance of Master Data cannot be overstated. Master Data forms the key dimensions and hierarchies used for reporting exposures, performance and other key business metrics. It reflects how the how the business is understood and how the Management wants to view it. Inadequate Master Data Management practices directly impede the ability to know precisely and concisely what exposures are on the books.

With companies seeking to apply analytics within operational processes in order to optimize, an accurate and consistent Master Data is a must-have requirement for analytics enablement.

The way forward

Master Data Management is the overarching element that will allow you to report in a meaningful way, optimize processes and control your risk. Its benefits will trickle down the entire organization. Pro-active Data Management anchors recurring processes and ensures you aren’t taking actions after the fact. In conclusion, MDM ought to be at the centre of your Data Strategy.

When it comes to practice, one of the most frequent misconceptions we see is the utopic view that MDM should be dealt with at each local IT system level. Doing so results in diverse practices and ultimately defeats the harmonization of understanding company-wide, which is the core purpose of MDM.

Having long acknowledged the diversity of the IT landscape within any given company, Tradesparent has for years helped our clients design and enforce MDM practices at the overlay level, above all systems. This path ensures 1) minimal dependencies, 2) bring faster results and 3) facilitates the alignment of Operational Systems.

If you wish to discuss your Master Data practices and objectives, feel free to schedule a call with our team.

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