In this report, Chartis provides an overview of the risk technology market and forecasts future expenditure growth for the sector as a whole and for specific functions.The report analyzes the market in a bottom-up manner to cover the market for risk technology in different geographies, vertical segments, and market tiers.
This report provides an update to Chartis’s Global Risk IT Expenditure 2011 report.
Key findings from this research include:
Spending on Risk IT continues to grow: Against a challenging economic, market, and regulatory backdrop, financial institutions continue to increase their investment in risk technology. In 2014, financial institutions globally will invest US$28.1bn in risk IT; rising 13% by 2015 to US$31.8bn. The increasing complexity of solutions ensures that professional services and maintenance will still constitute strong revenue streams for vendors and service providers, but the rate of increase is unlikely to be maintained. Chartis forecasts that the competition to secure software and services contracts will become increasingly challenging for vendors.
Risk governance and integration are the top investment priority: Between 2014 and 2015, spending on risk governance and integration will increase by 17% from US$10.9bn to US$12.7bn, representing the leading investment priority for financial institutions. Financial crime risk management is also a key destination for IT spending, with expenditure forecast to grow by 13% from 2014 to 2015.
North American institutions are increasing spending fastest: Between 2014 and 2015, firms in North America will increase their expenditure on risk IT by 16%. Those in Europe will increase spending by 12%, and those in APAC by 10%. This growth in spending among North American firms is higher across almost all risk categories. For example, spending on risk governance and integration will grow by 21%, compared with 12% and 10% in Europe and APAC respectively. The only exception is ALM/Liquidity, where firms in Europe will increase spending by 16% between 2014 and 2015, compared with 10% in North America and 5% in APAC over the same period.
Tier 3 firms are investing the most in risk IT, but rate of growth is highest in Tier 1 institutions: In 2015, Tier 3 firms will spend US$13.2bn on risk IT, compared with US$10.1bn among Tier 2 firms, and US$8.4bn at Tier 1 firms. Growth in spending, however, is highest among Tier 1 firms. Between 2014 and 2015, they will increase spending by 24%, compared with 9% for Tier 2 and 10% for Tier 3 firms.
Risk data management is the fastest-growing area of spending by technology type: Between 2014 and 2015, financial institutions will increase spending on risk data management by 17% from US$7.5bn to US$8.9bn. In absolute terms, however, spending on risk analytics will remain considerably higher. Between 2014 and 2015, spending on risk analytics will grow by 12% from US$10.7bn to US$12bn.
Firms spend most on internal expenditure, but external spending is growing: Firms continue to spend most on internal technology project, which will rise 18% to US$15.4bn from 2014 to 2015. However, firms are also looking for external assistance in developing their risk technology capabilities. Spending on external software will increase between 2014 and 2015 by 8% to US$8bn and spending on external services will increase by 11% over the same time to US$5.9bn.
Run the bank vs. Change the bank: A common thread across these trends is that financial institutions are trying to balance short-term needs, such as essential daily operations and meeting regulatory deadlines, with long-term objectives, such as enterprise-wide risk management and risk and finance integration. Financial institutions want to implement technology projects that will help them to meet short-term necessities (such as regulatory reporting), while helping them to move towards more integrated and enterprise-wide systems and to improve long-term performance