Global risk management technology is big business, with expenditure set to rise some 10% from nearly $21bn in 2012 to just over $23bn in 2013. From a regional perspective, in 2012, the bulk of that spend will be led by the European Union where the market will be worth $8.3bn, followed by North America where the spend will be nearly $6.5bn. Financial institutions (FIs) in Asia Pacific are forecast to spend $4bn and the rest of the world just under $2.1bn.
The growth is being driven largely by an increasing emphasis on regulation, risk oversight and enterprise risk management (ERM). Chartis has drawn on the broad expertise of its team of advisors and industry analysts to conduct extensive research into FIs’ approach to risk management and to provide detailed forecasts of risk technology expenditure. The report focuses on some of the drivers as well as providing detailed figures on the market.
As regulators’ rulebooks continue to expand, FIs find themselves in various states of readiness for Basel III, Solvency II, Dodd-Frank and so on. In its research Chartis has found that while FIs are looking to reduce their risk management technology costs, they also want to improve their risk management practices and compliance.
Chartis has also found that many organizations are dissatisfied with their existing technology and are looking to upgrade so that their systems are more efficient and effective in combating risk.
Two thirds of organizations have begun to put strategies in place to address their risk infrastructure requirements. This includes risk software, architecture standards, data sourcing and data warehousing. Over 50% say that risk technology and enhanced reporting of risk information are high on their list of priorities.
Many are looking to build risk information systems with the ability to gather real-time data from across the organization and generate reports customized to specific requests such as from regulators and senior management.
In addition, FIs are taking steps to strengthen their risk oversight function. Two thirds of FIs took measures to improve the process for reporting risk information to their board of directors and their risk management committees in the last 18 months. About half have enhanced their risk limits and updated their risk appetite limits. Some 80% expect to increase their spending on risk management over the next three years – a third by 25% or more.
More and more, FIs are looking to manage risk within an ERM framework. Chartis’ research shows that 85% of Tier 1 FIs have an ERM program in place or are in the process of implementation. An effective ERM framework can provide insight into the overall impact of risk on the institution and allow institutions to measure risk levels.
The following Tables and Figures provide forecasts on growth in the risk management technology market as well as analysis of the specific trends and demand drivers.