Digital First: The ESMA Data Strategy

In June 2023, the European Securities and Market Authority (ESMA) released its ESMA Data Strategy 2023-2028 to present a framework to digitize data collected from its European Union (EU) member stock exchanges supporting its strategy to develop the European Single Access Point (ESAP) data hub. ESMA is an independent EU market authority that oversees EU security trading. Its mission is to protect investors, facilitate market stability, and promote orderly market functioning. To achieve its mission, the authority developed a data strategy plan to address the rapid changes in technology and reporting requirements that will soon be effective for its new regulatory mandates: the Corporate Sustainability Reporting Directive (CSRD) and its proposed ESAP portal.

The CSRD is a game changer for environmental, social, and governance (ESG) reporting that becomes effective for EU companies in 2024, while the ESAP portal is a single digital access point for EU companies’ publicly reporting financial and sustainability information. The plan is significant because it lays out ambitious objectives to provide data transparency and comparability to its many stakeholders. This dynamic document will be updated to accommodate new developments in technology and future supervisory mandates issued by the EU and supervised by ESMA. ESMA’s data strategy plan serves as a model that management accountants can adapt to their organization.

ESMA’s Data Strategy Motivation

ESMA issued its initial data strategy in 2017 and recognized that it needed to be updated to address changes that occurred since then. In 2021, ESMA assessed its data and analytics maturity level and found that it fell in the opportunistic category, considered low-maturity or basic. Gartner defines this category’s level as an organization with business units that pursue stand-alone projects or initiatives without a common, coordinated, integrated structure across the organization.

ESMA’s data is a strategic driver to support its enforcement of consistent and clear regulatory mandate reporting standards. ESMA collects its members’ reporting data and analyzes it to support its supervisory role. ESMA’s analytics was suboptimal, impacting the value of the data for its stakeholders. Hence it needed to develop a data strategy to achieve its mission. Verena Ross, chair of ESMA, said: “Our goal is to provide easier access to financial data, both through enhanced data sharing with authorities across the EU and at national level. Initiatives such as ESAP will provide access to financial data to the wider market, including retail investors.”

Data Vision Statement

After the maturity level assessment, ESMA developed a data vision statement. ESMA’s data strategy vision is to “contribute to ESMA’s mission with high quality data and analytical information.” To achieve the vision, ESMA identified three goals: data efficiency to reduce compliance costs and improve data quality, share reported information and knowledge and its tools with the National Competent Authorities (EU member-country stock exchanges governed by ESMA), and support ESMA decisions with evidence-based data. The data strategy will be supported by annual work plans, projects, and programs to operationalize its strategy.

ESMA also created a data intelligence and technology department to manage the data life cycle for the plan’s activities and to develop competencies necessary to implement it.

ESMA’s Six Data Strategic Objectives

ESMA established six data strategic objectives with a proposed implementation between 2023 and 2028. The objectives are fluid and will be modified as necessary as data needs evolve.

1. Create an enhanced data hub: Ensure accessibility to securities transactions, interoperability, and usability with member states’ systems. While the EU is focusing on a centralized data hub, each member state has its own proprietary regulatory reporting system that needs to securely connect to ESAP.

2. Serve the public interest through transparent and easily accessible data access: The data will be collected and disseminated in a machine-readable format to serve stakeholders’ needs, including those of investors and regulators. The format of the data hasn’t yet been defined, but Inline eXtensible Business Reporting Language (iXBRL) is a leading candidate.

3. Implement data-driven supervision: Enable and leverage technology to achieve effective data-driven governance and supervision.

4. Develop thought leadership: Pursue thought leadership and collaboration on data standards, technologies, and reporting innovations.

5. Create an efficient data policy: An efficient, centralized, transparent, and cooperative data policy reduces compliance costs and burdens for all stakeholders and meets data requirements.

6. Develop a structured and standardized data usage policy: Ensure that relevant and data-driven systems support compliance requirements to reduce costs and promote efficiency. Focus on evidence-based policy development that carries through to oversight.

Implication for Management Accountants

All organizations face the double-edged sword of technology’s rapid growth: disruption and opportunities. Understanding and leveraging technology to manage data will lead to value creation and a competitive edge. The ESMA plan is an excellent model for management accountants to study as they develop their organization’s data strategy.

The initial plan provides a high-level road map toward optimizing an organization’s data and analytics strategy employing a standardized development approach: define, design, implement, run, and use. After the plan is developed, it’s converted to projects with measurable project objectives. An organizational imperative is to develop an agile data strategy plan to address the challenges to stay competitive. Management accountants’ participation in this initiative is key to achieving this objective.