Risk management IT set for increased spending


25 May 2010

Financial institutions worldwide will increase spending on technology related to risk management, according to three reports released by Chartis Research. The spending increase is, in part, attributable to financial institutions' responses to the financial crisis, regulatory changes and a desire to combat financial crime.

"Financial institutions realise they must continue to invest in strong risk management IT systems," says Peyman Mestchian, managing partner at London-based Chartis. "One of the main lessons learned from the financial crisis was that risk management systems weren't up to the job." 

Chartis' research reveals the key areas in risk management IT where financial services firms will continue to invest. The three new Chartis reports, "Financial Crime Risk Management Systems 2010", "Market for Solvency II Technology 2010" and "Market Risk Technology Solutions 2010" provide in-depth discussions of these markets and forecast how and where growth in IT spending will occur. The Chartis reports also identify demand-side trends, best practices, leading software vendors and competitive landscapes. They can be downloaded at www.chartis-research.com

"Financial Crime Risk Management Systems 2010" gives a detailed account of the increase in the occurrence and complexity of financial crime and predicts that the global recession will increase the frequency of internal fraud, security breaches and false accounting. Financial services firms, according to the report, are particularly troubled by insider fraud, because of the reputational damage it brings. The paper also discusses the proliferation of identity theft and Internet-based frauds, like phishing, which are impacting financial services firms. Accordingly, firms are devoting more resources to fighting all kinds of fraud. Chartis forecasts the global market for financial crime risk management technology will grow to $4.19 billion by 2013, at a compound annual growth rate of 15%. 

"Market for Solvency II Technology 2010" forecasts that expenditure will grow to $1.67 billion by 2013 at a compound annual growth rate of 19.2%. "The rate of growth reflects the growing cost and complexity of implementing Solvency II technology projects," says Mestchian, "For example, hiring and retaining staff able to manage sophisticated Solvency II projects has become a greater cost than anticipated." 

"Market Risk Technology Solutions 2010" forecasts the global spend for market risk software and technology will be $1.28 billion in 2010 growing to $1.8 billion by 2014, reflecting a compound annual growth rate of 8.9%. "The EMEA region represents most of the spend this year, however, Asia Pacific will provide most of the growth over the next five years," says Chartis' Mestchian.