The Impact of Data Warehousing in Finance

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The Impact of Data Warehousing in Finance
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Managing financial data can be complex and tedious.

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After all, gathering, processing, and analyzing volumes of financial information requires accurate and seamless processes, including using reliable data transfer services to streamline your workflows.

This is where data warehousing comes in handy.

Data warehousing provides a resource of critical data you can easily track over time and analyze to help you manage your financial processes efficiently and make better decisions.

Continue reading to know more about the impact of data warehousing in finance, including its benefits and common use cases in the financial industry.

What Is Data Warehousing?

Data warehousing is technology that allows secure, electronic information storage. It takes data from multiple sources and puts them in a central repository for future and further use.

The term data warehousing can also refer to building and using a data warehouse.

The main objective of data warehousing is to build a collection of historical data. This makes it easy to retrieve data to gain powerful insights and other Business Intelligence (BI) purposes.

Data warehousing provides the information infrastructure necessary to track your historical data and past successes and failures, informing your future decisions.

Modern data warehouses allow you to run queries and analyses on your historical data extracted from transactional sources.

However, data warehouse software can vary based on specific features and functionalities.

For instance, a general comparison of Redshift vs. Athena generally shows that Redshift works better if you run high-performance, complex queries involving sizable datasets.

On the other hand, Athena would be a better option for running quick, convenient queries at a low cost without setting up complex infrastructure.

The Uses Of Data Warehousing In The Financial Industry

Financial institutions generally use data warehouses the same way most businesses and organizations do.

Some of the specific ways the financial industry uses data warehousing include the following.

Capture Customer Data

Gathering and analyzing customer data is critical for financial companies to improve service delivery and build client relationships.

Data warehouses simplify this process by allowing you to capture and track massive volumes of customer data and historical information from multiple sources quickly.

With data warehouses, financial companies can capture every customer interaction, helping you gain unparalleled insight into what drives purchasing and other customer behaviors.

Data Analytics

Many financial institutions leverage data warehouses for predictive and real-time analytics.

Data warehouses allow you to centralize storing and simplify accessing historical data to discover financial data patterns.

This helps you uncover critical trends to prepare your financial company for future events and make more strategic decisions.

Data warehouses also make it easy to store, organize, and access crucial financial data such as customer insights, fraud detection information, and more.

Manage Risks

Investors, competitors, and other entities pose certain risks to financial institutions. This makes it crucial to streamline data analysis and manage risks through enhanced machine learning algorithms.

Data warehousing helps automate your risk management process using algorithms and machine learning (among others).

A data warehouse’s ability to centralize data from multiple sources quickly can speed up your analytics, allowing you to derive powerful insights efficiently and make decisions promptly to minimize risks.

Data Warehousing Benefits For Finance

Seamless data management and analysis are crucial for financial companies to thrive and succeed.

Data warehousing helps make this possible by providing the following benefits.

Simplifies Reporting From Structured Data

Data warehouses allow you to store financial data in structured formats, including a structure that can change itself into multiple formats for efficient reporting and analytics.

For instance, a data warehouse’s Extract, Load, and Transform (ELT) processes can take or extract data from a source, transform it into an effective format, then save or add it to the warehouse.

It also uses metadata (the data that provides information about one or more aspects of the other information) from the primary transactional database. This allows for seamless querying and data analysis.

Data warehousing gives you transformed data in a defined language and structure, which helps simplify your financial reporting and analytics.

Improves Decision Making

Leveraging data warehouses improves your financial data’s quality since these can easily take accurate and reliable data from multiple sources.

As such, the higher your data quality is the better your decision-making practices.

You’ll get precise data necessary to make highly accurate financial predictions and, in turn, gain a competitive advantage over other companies.

Allows Easier Data Integration

Financial data can come from multiple sources. This makes a data warehouse’s ability to integrate various information into a single source crucial.

For instance, many financial institutions deal with alternative data — auxiliary financial information vital to making investment decisions away from corporate or official sources.

Alternative data can give you an investment opportunity’s full picture when used with information from your traditional data sources.

Data warehousing puts traditional and alternative data within your reach, improves your data quality, and simplifies integrating all the necessary information.

Store Volumes Of Data History

Data can change over time. This makes it crucial to have easy and quick access to specific data points in their history, which data warehousing allows you to do.

Data warehouses allow financial services such as hedge funds to access and use historical data to allow for backtesting and conducting audit trails.

Also, stored data warehouse information is vital if the source transaction systems don’t maintain data history themselves.

Reduces Errors And Saves Time

Data warehouses eliminate manual, time-consuming tasks and the chances for human error.

This allows you to draft and generate accurate financial reports quickly since you won’t need to find and access data from multiple sources and systems manually.

Data warehousing lets you automate specific data flows and functions, allowing you to regularly update your financial systems efficiently.

This can reduce the hours you spend handling financial data while increasing your productivity and ability to drive results.

Data Warehousing Is Transforming Financial Data Analytics

Dealing with financial data can get complicated, making data warehousing critical to centralizing all finance-related and critical information.

With a reliable data warehouse, you can easily store, access, and retrieve your extracted data for future references — from making predictions to strategic decisions.

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Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at [email protected]
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