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Operational Risk Management Systems for Financial Services 2015

Insufficient progress – A recent Basel Committee review1 of operational risk management practices of 60 systemically important banks in 20 jurisdictions revealed that “banks have made insufficient progress” in implementing the principles introduced in 2003 and revised in 2011.

98% of the top 50 operational risk losses in the last 12 months were due to conduct risk – Analysis by Chartis has revealed that 98% (by value) and 82% (by frequency) of the top 50 operational risk losses globally over a 12 month period (March 2014 to February 2015) related to suitability or fiduciary failures and improper business or market practices. The aggregated value of these 50 loss events is estimated to be $60bn.

The replacement market is growing fast – A significant proportion of financial institutions that implemented their first operational risk management systems before 2010 have replaced or are looking to replace their old systems. This is particularly true for larger tier 1 financial institutions.

Connected or integrated solutions are winning – vendors with multiple operational risk, compliance, finance, performance, anti-financial crime and governance capabilities are winning against the silo-based point solution providers.

Next generation products are starting to penetrate the market – small innovative players have entered the market with new technology capabilities such as unstructured data analytics, natural language processing, dynamic workflow engines, user-definable data-model builders and cloud-based high performance computing. Chartis has observed an increasing number of financial institutions becoming early adopters for such solutions as “semantic audit analytics”, “real-time automated control monitoring”, “automated social media based risk monitoring” and “video game operational risk simulations”.

This report is an update to Chartis’s Operational Risk Management Systems 2014 report. Key updates include latest demand-side trends and updated vendor positions on a new RiskTech Quadrant. This report uses Chartis’s RiskTech Quadrant® to explain the structure of the market. The RiskTech Quadrant® uses a comprehensive methodology of in-depth independent research and a clear scoring system to explain which technology solutions meet an organization’s needs. The RiskTech Quadrant® does not simply describe one technology solution as the best operational risk solution; it has a sophisticated ranking methodology to explain which solutions would be best for specific buyers.

This report covers the leading vendors offering operational risk solutions for financial institutions, including Chase Cooper, ClusterSeven, eFront, EMC-RSA, Empowered Systems, Enablon, FICO, IBM, MEGA, MetricStream, NASDAQ BWise, Oracle, Oxial, SAP, SAS, Thomson Reuters, Wolters Kluwer FS, and Wynyard.