Buying alternative data means taking on a new counterparty in a vendor relationship, with broader risks than insider trading and personal data, which tend to dominate the risk assessment.

We believe that, as a practical matter, buyers who regularly engage alternative data vendors reject a small but meaningful percentage of vendors for compliance reasons and that vendors may underestimate the frequency of such rejections.

Many buyers emphasise legal and compliance tasks at the outset of an alternative data deal, with a lengthy diligence and contracting process. But what happens in the weeks and months after the contract is signed? Buyers remain subject to ongoing compliance requirements, products break, contractual terms are triggered, etc. Legal and Compliance teams should periodically re-assess vendors – before they show up in the news.

As transactional data providers expand into new geographies such as the UK and EU with information derived from open banking, rewards apps, and email receipts, buyers should consider key concentration risks in diligence and contracting that are particular to expensive transactional data.

De-identification is a common approach to working around or minimizing compliance risks related to personal data. In 2021, certain kinds of popular datasets, such as healthcare data, will likely require additional scrutiny as the coronavirus pandemic drags on and the accumulation of related datasets on the buyside increases the possibility of re-identification.

Trial licenses for data inspire mixed emotions in legal and compliance staff. The promise of free or inexpensive data (and less paperwork) appeals to both the front and back office; however, free data still presents risk with respect to diligence and contracting that may frustrate a buyer’s attempts to make special accommodations for trials.

We constantly hear concerns related to scraping. Many of these concerns are still expressed at a high level, indicating broad uncertainty even in the face of the hiQ Labs, Inc. v. LinkedIn Corporation decision.

The buyside is increasingly concerned with the quality of the alternative data that it collects. We have analyzed some of the data quality issues commonly raised by our buyside clients, whether they are looking to improve the performance of established data teams or considering building such a team. In this article we consider a few of the approaches already in play with (and potential approaches of) sophisticated buyers and sellers of alternative data.